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Home , Argo (automobile), Autocar Company, Black (automobile), Black Motor Company, Cartercar, Charles Duryea

JOHN D. MAXWELL EDGAR L APPERSON A. L. RIKER JOHN S. CLARKE ROLLIN H. WHITE H. H. FRANKLIN CHARLES DURYEA CHARLES B. KING CHARLES CLIFTON ALEXANDER WINTON

THE DECORATION OF THE PIONEERS, JANUARY 6, 1925 In recognition of their services to the automobile industry during the first quarter century of its history, these men were decorated with silver medals at the Silver Anniversary Dinner of the National Automobile Chamber of Commerce. Their names were chosen from a list, supplied by the Smithsonian Institu- tion, of the Americans who had contributed the most to the mechanical development of the motor . Included in the picture is Charles Clifton, who as president of the National Automobile Chamber of Commerce acted as host during the ceremony. Not in the picture, but decorated also, was R. E. Olds. IVN Hd 0 . I LSd II_ ■ `1 Fld 'Cr This book is dedicated to three men who have given counsel throughout its preparation:

EDWIN F. GAY CHARLES CLIFTON WILLIAM E. METZGER

COPYRIGHT, 1928, BY A. W. SHAW COMPANY PRINTED IN THE UNITED STATES OF AMERICA PREFACE

THIS book attempts to trace the economic and com- mercial growth of the American automobile industry. Manufacturing methods and processes are discussed only as a background for the proper understanding of market and financial developments. A companion volume now in preparation will deal more fully with the history and problems of mechanical invention and factory organization. Because of the recency of most automotive develop- ments, there is little in print upon which one may draw. I have therefore obtained most of my data from the field—from companies, from individuals, and from trade associations. But in all cases, excepting where data were imparted to me in confidence, I have indi- cated my sources. The footnotes are all printed at the back of the book in order to free the text from a mass of details. The person who is interested, however, not merely in general conclusions and trends, but also in certain qualifications of statement and in the sources of various data, can readily find them either in the notes or in the appendices. The supporting data them- selves, for all charts, appear likewise in an appendix. It is here impossible specifically to express my thanks to each of the persons who have cooperated with me in gathering the materials for this book. A list of those who have contributed data, through interviews or

PREFACE vii vi THE AUTOMOBILE INDUSTRY But most of all, I am grateful for the generous advice otherwise, is printed on pages 329 ff. But I have to thank and guidance of Professor Edwin F. Gay, of Harvard especially, among the men of the industry, Mr. Wil- University, and for the constant aid of my wife. liam E. Metzger, of , Colonel Charles Clifton, of Buffalo, Mr. Roy D. Chapin, of Detroit, Mr. J. Newton RALPH C. EPSTEIN Gunn, of New York City, and Mr. W. A. Brush, of The University of Buffalo September 19, 1927 Detroit. Likewise, for their fullest cooperation, I am indebted to the members of the Board of Directors of the National Automobile Chamber of Commerce; to Mr. Alfred Reeves, the Chamber's general manager; and to Messrs. 0. P. Pearson, Robert A. Brannigan, John C. Long, W. I. Powlison, and G. C. Arvedson, also of that organization. I wish also to record the courtesy of Mr. Howard E. Coffin, who opened to me his private library in Detroit. Both to the Committee on Sheldon Traveling Fellow- ship, of Harvard University, and to the Committee on Aid to Research, of the American Council of Learned Societies, I am indebted for the award of grants which defrayed a considerable portion of the expense con- nected with obtaining data from the field. Either for various sundry courtesies or for reading parts of the manuscript, I may also thank Professors F. W. Taussig and Homer B. Vanderblue, of Harvard, and Professor W. L. Crum, of Stanford University; Professor Lawrence H. Seltzer, of the College of the City of Detroit; my colleagues, Dean C. S. Marsh, Pro fessor Oliver C. Lockhart, Professor Julius W. Pratt, and Mr. Barnet Nover; my friends, Messrs. S. A. Stephens and Volney Parker. CONTENTS

PREFACE V

I AN EPOCH IN TRANSPORTATION 3 1. The Significance of Automotive Transportation 3 2. Effects upon Rural Life 7 3. Other Influences upon Rural Life 12 4. Changes in Metropolitan Organization 14 5. The Development of Post Roads 17 6. The Motor's General Social Influence 19

II THE EVOLUTION OF MASS PRODUCTION 23 I. Manufacturing Proficiency and Commercial Devel- opment 23 2. Invention and Early Construction 24 3. Rapid Development of Manufacture . . . . 28 4. Historical Basis of Present-Day Methods of Produc- tion 33 5. Early Productive Organization 37 6. Development of Standardization in Chassis Parts 41 7. Development of Internal Plant Economies . . 43 8. External versus Internal Economies so

III GROWTH OF THE MARKET, 1903-1916 55 1. The Basis of Consumer Demand 55 2. Consumer Demand and Price Determination 62 3. General Growth in Market Demand 65 4. Character of Market Demand 71 ix

x THE AUTOMOBILE INDUSTRY CONTENTS xi 5. The Underlying Causes of Demand. Changes . 77 3. Summary of Movements from Group to Group; Ex- 6. Saturation of the High-Priced Car Market . . 93 ceptional Cases 199 7. Summary: Market Development through 1916 . 99 4. Movements between Production Groups, 1917-1926 202 5. Movements of Conspicuous Leaders Relative to Each Iv Other, 1903-1924 204 Causes of Changes in Leadership 208 MARKET DEVELOPMENT, 1917-1926 102 6. 1. General Characteristics of the Period 102 VIII 2. The Self-Starter, the Tire, and Other Refine- ments 105 CONCENTRATION AND COMBINATION; MANUFACTURERS' AS- 3. The Rise of the Closed Car 110 SOCIATIONS 213 4. Introduction of Installment Sales 115 I. The Scale of Production 213 5. Production by Cylinder and Price Classes . 122 2. Combinations in the Industry's History 2 18 3. The Association of Licensed Automobile Manufac- V turers 227 METHODS OF MARKET DISTRIBUTION 132 4. The National Automobile Chamber of Commerce 235 r. Retail and Wholesale Distributive Channels . . 132 IX 2. Characteristics of Distribution Through Dealers . 136 3. Marketing Cooperation and Control by the Factory 144 THE FORTUNES OF LEADING PRODUCERS 240 4. Speed Competitions and Reliability Contests . . . 152 r. The Net Incomes of Ford, Reo, and , 1905- 5. Technical Contributions from the Early Tours . . 157 1926 240 2. The Earnings of Six Other Companies 247 VI 3. The Level of Profits as Represented by Nine to Fif- teen Large Concerns 252 THE ENTRANCE AND EXIT OF FIRMS, 1903-1926 . . . 162 4. The Nature of Profits in a New Industry . . 257 1. The Shifting Personnel of Particular Industries . 162 2. The Length of Life of Companies and the Causes X of Failure i68 3. Failures Year by Year '74 MARKET STABILIZATION AND INDUSTRIAL MATURITY . 266 4. Causes of Changing Rates of Failure i8o 1. Stabilization of Demand and the Replacement Mar- 5. Average Life of Firms Leaving the Industry . i88 ket 266 2. Relation Between the New Car and Used Car Mar- VII kets 268 THE RISE AND FALL OF FIRMS, 1903-1926 193 3. The Export Market 271 4. The Importance of Marketing Policy 276 1. The Relative Movements of Specific Firms . . . 193 2. Movements Between Production Groups, 1903-1916 194 NOTES 287

xii THE AUTOMOBILE INDUSTRY

APPENDICES A. GENERAL STATISTICS OF AUTOMOTIVE MANUFACTURE, MARKET DISTRIBUTION, AND FINANCE 313 ILLUSTRATIONS r. Production and Value of Product 314 2. Invested Capital, Employment, and Wages . 316 The decoration of the pioneers, January 6, 1925, Frontispiece 3. Registration of Motor 317 4. World Trade, World Production, and World Regis- r. Title page of the first number of the Horseless Age, November, 1895 tration 319 5 5. Installment Sales: Financial Figures and Ratios . . 322 2. Number of persons per passenger automobile, in the 6. Financial and Other Statistics: Ford Motor Com- various states, as of January r, 1927 13 pany and Corporation . . . . 323 3a. A main highway in New York State, near Buffalo, B. SOURCES AND SUPPORTING DATA 329 in 1912 21 1. List of Acknowledgements to Individuals . 329 3 b . A typical New York State road, near Buffalo, in 1927. 21 2. Data of Charts and Tables 334 4. Four early gasoline automobiles of 1893-1899 and their builders 29 C. HISTORICAL MATERIALS; LISTS OF COMPANIES, ASSOCIA- TIONS, AND TRADE JOURNALS 361 5. Assembly methods before and after 1912 . 32 r. Articles of Agreement of the Association of Licensed 6. The Olds Motor Works in 1903 38 Automobile Manufacturers 361 2.. Agreement Executed between the Electric 7. Four of the leaders in the development of automotive Company and the Winton Motor Carriage Com- standardization 42 pany 371 8. Four years of machinery and manufacturing methods 3. Racing Records . . . 375 adopted since 1912 45 4. List of Passenger Automobile Manufacturing Com- 9. The difference of two decades 48 panies, 1895-1927 377 5. Lists of , , and Taxicab Manufacturers as ro. The celebrated curved-dash 56 of January r, 1927 382 r. Four heavy of 1906-1908 78 6. Trade and Technical Journals 385 7. List of Automotive Trade Associations, 1927 . 385 12. Various mechanical designs of 1903-1907 88 13. William E. Metzger 95 391 INDEX 14. The evolution of the closed car 113 is. A salesroom of 1899 138 16. A New York City automobile "salon," 1926 141 17. The first American automobile show held in Madison Square Garden, New York City, in 1900, and the

xiv THE AUTOMOBILE INDUSTRY

thirteenth annual exhibition held in the same build- ing 12 years later 153 18. Henry Ford passing Alexander Winton in the seventh mile of a o-mile race held at Grosse Point track, CHARTS Detroit, in 1901 I6o 19. Some proud trade-marks of 1904 170 x. Motor vehicles and telephones in use in the United 20. Four pioneer manufacturers who in 1908 discussed a States 8 possible merger of their companies 226 2. Production of wagons, carriages, and motor vehicles . 10 21. George B. Selden 228 3. Growth of surfaced road mileage in the United States 18 22. A typical advertisement of the "Licensed Association" 4. Passenger automobile production in the United States, during its campaign to enforce the Selden Patent 234 1903-1916 66 23. Four leaders in automotive cooperation 237 5. Passenger automobile production in the United States by three-year periods, 1903-1916 72 24. Highland Park Plant of the 241 25. Automotive factories of today and yesterday . . 277 6. Factory sales of passenger cars by price classes, 1903- 1916 75 7. Indexes of automobile production, physical volume of manufactures in general, and national income, 1909- 1916 82 8. Retail prices of 30" x 3'4" (Ford size) tires, 1909- 1916 86 9. Factory sales of passenger cars by cylinder classes, 1903-1916 90 to. Factory sales of passenger cars by cylinder classes, Ford production excluded, 1903-1916 92 11. Production of low, medium, and high-priced cars, 1903- 1916 93 12. Frequency distributions of factory sales according to price class, 1903, 1907, 1911 100 13. Passenger automobile production in the United States, 1903-1926 103 14. Consumer prices of cord and fabric tires, 30" x 372 " (Ford size), 1919-1923 108 15. Production of high-pressure tires and balloon tires : 109 xv xvi THE AUTOMOBILE INDUSTRY CHARTS xvii 16. Percentage of manufacturers offering cars with self- starters as standard equipment 32. Movement of 63 automobile firms over the period 1903-1916 196 17. Percentage of manufacturers offering cars with four- wheel as standard equipment 33• Movement of 84 automobile firms over the period 1917-1926 203 18. Percentage of closed car production to total passenger car output, 1915-1926 34. Movement of 28 leading automobile producers ranked according to places in production 206 19. Index numbers showing the average spread between Scales of production in passenger automobile manufac- closed- and open-car prices, 2922-1926 . . . . 35. 114 ture, 2903-2926 214 20. Factory sales of passenger cars by cylinder classes, Median and arithmetic mean production figures per 1917-1926 123 36. plant, 1903-1926 216 21. Factory sales of passenger cars by cylinder classes, Percentage of automobile output produced by firms Ford production excluded, 1917-1926 37. 125 standing above the first quartile, 1903-1926 . . . 217 22. Production of low, medium, and high-priced cars, 1917- Percentage of automobile output produced by firms 1926 38. 126 standing above the first quartile, Ford excluded, 23. Factory sales of passenger cars by price classes, 1917- 1903-1926 218 2926 229 39. Net worth of General Motors Corporation, 2909-2927 219 24. Distributing systems in use by automobile manufactur- ers 40. Percentage of total American and Canadian motor 134 vehicle output produced by the General Motors Cor- 25. Magazine expenditures of twelve leading poration, 1909-1926 221 companies in 1926 146 41. Percentage of total passenger car output produced by 26. Total magazine advertising expenditures by automotive "licensed manufacturers," 1903-1911 231 manufacturers, 1914-1926 147 42. Percentage of total American and Canadian motor 27. Frequency distribution of the lengths of life of 18r vehicle output produced by the Ford Motor Com- passenger car manufacturing firms, from the begin- pany, 1903-1926 2 42 ning of 1895 to the beginning of 1927 169 43. Percentage of net profits to net worth: Ford, Reo, and 28. Number of firms entering and leaving the passenger Packard companies 243 automobile industry, 1903-1926 176 44. Percentage of net profits to net worth: -Over- 29. Percentage of failures (exits) in automobile manufac- land, General Motors, and Hudson companies . . 248 turing compared with failures in general business, Percentage of net profits to net worth: , 1903-1926 45. 177 Nash, and companies 249 30. Frequency distributions of number of companies serv- 46. Annual price ranges of automotive stocks and of rails ing different markets, 2907, 1913, 1916 . ' ° • 186 and industrials, 1917-1926 251 32. Average life of firms leaving the automobile industry in 47. Percentage of net profits to net worth in the motor each year, 1903-1926 290 vehicle manufacturing industry, 1910-1926 . . . 256 xviii THE AUTOMOBILE INDUSTRY

48. National income and automobile production, 1919- 2926 269 49. Quarterly exports of motor vehicles from the United States, from the first quarter of 1923 through the second quarter of 1927 272

5o. Registration of passenger automobiles in leading coun- tries of the world, 1926 273 51. Persons per in various countries of the THE AUTOMOBILE INDUSTRY world, 1926 2 74 52. Production of Ford and passenger cars, ITS ECONOMIC AND COMMERCIAL 1922-1926 282 DEVELOPMENT

TABLE I. Frequency distribution of firms retiring from passenger car manufacture in each year, 1903-1926, according to the number of years they were engaged in the in- dustry 289 AN EPOCH IN TRANSPORTATION

1. The Significance of Automotive Transportation

IN NOVEMBER, 1895, there came from the press of one E. P. Ingersoll, in New York City, the first number of a new periodical, the editorial page of which carried the following statement: The appearance of a journal devoted to a branch of industry yet in an embryonic state may strike some as premature, and the somewhat desultory character of this number may provoke criti- cism in some quarters. But those who have taken the pains to search beneath the surface for the great tendencies of the age see what a giant industry is struggling into being there. The editors called their new journal The Horseless Age, a title as daring as was the publication of the journal itself. For in the year 1895 but four auto- mobiles were made in the whole United States.' Yet the vision of the editors has been more than realized, and the subsequent product of that young and strug- gling industry of which they wrote has revolutionized road transportation both in America and, to a lesser extent, in many other parts of the world. Thirty years ago, a horseless carriage consisted of three or four bicycle wheels and a light framework in which sputtered a noisy little single-cylinder engine. From the handful of such experimental "one-lung" con-

3 4 THE AUTOMOBILE INDUSTRY trivances built in this country by Charles E. Duryea, R. E. Olds, Elwood Haynes and others' during the nineties, have come the 22,000,000 motor cars and of today. THE HORSELESS AGE. With but scant attention paid to it in many quarters, and distrusted and ridiculed in others, the infant auto- mobile industry thus launched at the close of the cen- A MONTHLY JOURNAL tury struggled on during the decade which followed, PUBLISHED IN THE INTERESTS OF THE MOTOR VEHICLE INDUSTRY until in 1908 the then stupendous total of 6o,000 cars was produced. In that year, W. C. , then pres- VOLUME 01,E. NUMBER ONE. ident of , predicted that the time would come when a million automobiles a year would be made. He A COMPILATION, was laughed to scorn, even by his brother manufac- turers. But eight years later, in 1916, more than a MOTOR VEHICLES. VEHICLE MOTORS AND SYSTEMS OF million cars were produced; and in every year since PROPELLING AND CONTROLLING VEHICLES 1916 the production of motor vehicles has exceeded that figure. In 192o, more than two million vehicles BROUGHT OUT IN THE UNITED STATES were made in the United States; in 1923, well over 1894 AND 18 9 5. three million; in 1925 and 1926, slightly over four million a year. Twenty-two million motor vehicles are now registered in this country. Incredible as it seems, SUBSCRIPTION, TWO DOLLARS A YEAR. SINGLE COPIES, TWENTY-FIVE CENTS. there are actually more automobiles in America than telephones. In sheer rapidity and magnitude, the growth of automotive transportation in the United P1.1.1-1,11[13 A• E. P. INGERSOLL. States constitutes one of the most amazing develop- 1 57 •ND /59 IVI,LIAN ST., ments in all economic and commercial history. NEW YORK. The factories which make motor cars and motor trucks now employ more than 375,000 persons, while di- Figure r: TITLE PAGE OF THE FIRST NUMBER OF THE rectly and indirectly over 3,700,000 wage earners are Horseless Age, NOVEMBER, 1895. engaged in producing and distributing automobiles, 6 THE AUTOMOBILE INDUSTRY AN EPOCH IN TRANSPORTATION 7 accessories, and parts. The capital invested in auto- thing that was not available before its advent: it gives mobile factories in the year 1926 totaled over two "a quick, immediate, individual transportation service" billion dollars, while the yearly wages bill for the 375,- with sufficient speed to reduce distances amazingly and 000 workers well exceeded half a billion.° Within a to make possible a great multitude of activities which period of scarcely 3o years, the production of motor could not otherwise readily take place. vehicles has become the largest of the country's manu- 2. Effects upon Rural Life factures, if the importance of these be measured by the wholesale value of their products.' As a result, Detroit, Of the 22,000,000 motor vehicles now registered in from a city of 285,000 people in 1900, has become an the United States, about 4,500,000 are owned by farm- industrial center whose population numbers one and a ers. A survey made by J. Newton Gunn several years quarter million; Lansing, a town of 16,000 in 1900, has ago showed that 33% of all cars then in use were in a population of more than 7o,000; while , which a towns of i,000 or under, while 55% of all cars were scant quarter of a century ago possessed 13,000, now owned by inhabitants of communities of under 5,000 has approximately 135,000 inhabitants. Many other population. Later figures indicate roughly the same cities, not themselves automobile manufacturing cen- proportions.° Together with the telephone and the ters, have grown industrially because of the greater electric light, the automobile has taken its place on the concentration of production made possible by the use farm as one of the necessities of life. To the farmer of the motor car and truck. it has meant increased effectiveness in raising and mar- Fundamentally, this development has taken place by keting his products, a wider range and greater ease of virtue of the fact that the automobile offers an impor- obtaining supplies for his farm and goods for his house- tant type of transportation service for which a need has hold, increased opportunity for social intercourse and long existed. The motor car satisfies the desire not recreation, quicker access to competent medical atten- merely for transportation, but for transportation that tion and hospital service, and centralized, better school- ing for his children. is both swift and individualized. It goes without say- ing that the automobile is not the culmination of all To travel twenty or thirty miles formerly took the efforts at transportation mechanisms. Nor is it even farmer a whole day. Now the same distance can be the swiftest which is now available; the airplane is covered by passenger car in an hour. With horses, coming into its own, and the railroad, for certain pur- twenty miles constituted a considerable haul. By motor poses, still affords somewhat faster transportation than truck, from half an hour to an hour and a half, depend- does the motor car. But the automobile gives one ing upon the size of the truck, is all the running time 8 THE AUTOMOBILE INDUSTRY AN EPOCH IN TRANSPORTATION 9 30,000 20,000 of their products. For these 215 producers, the average

ow/. distance now traveled to market is 18 miles. Fifty-one 10,000 Telephones •••• of the farmers included in the study now use markets 5,000 oe io to ig miles away, and twenty-two others truck their

hones 4,000 .00 3,000 produce to markets 35 or more miles away.8 lep

Te 2,000 This widening of selling areas has important eco- Motor or

s nomic consequences. One obvious result is the decrease 1,000 Vehicles le

c in transportation cost which makes such an extension hi 500

Ve 4 00 of the market possible. The report of the Joint Com- f 300 o mission of Agricultural Inquiry8 indicated that the aver- ds 200 age cost of hauling wheat by horse, from farm to point an s 100 of shipment, amounted to about 3o cents a ton mile.

Thou By truck, or by , this amount was cut just in 50 40 half. The expense of hauling corn, which formerly 30 averaged 33 cents a ton mile to move to shipping points, 20 1002 1907 1912 1917 1923 1928 was cut more than in half; while cotton, which had

Chart Motor vehicles and telephones in use in the United States. previously cost 48 cents a ton mile to transport, was carried at 18 cents. which such a trip requires. The result is that the radius It is not to be assumed from these figures that any of operation is extended from one of less than fifteen large proportion of farmers, the country over, them- miles for the team and wagon to one of over fifty miles selves own trucks. Only about 7% of them do." Some for the motor truck. farmers not possessing trucks have their hauling done How this increase in hauling radius has widened mar- by neighbors who own them; about 40% of the Corn ket areas is evidenced by an investigation of the De- Belt farmers above mentioned reported that they had partment of Agriculture, which summarizes the expe- done custom hauling of this character. But a far bigger rience of 831 Corn Belt farmers who own trucks.' The factor, in a number of states, is the operation of high- average distance of these farmers from their markets, way common carriers. There are now probably be- before acquiring trucks, was 8 miles. Since acquiring tween two and three thousand motor express lines in motor trucks, 215 of these men, or a little over one the United States"—in some individual states, a hun- quarter of them, have changed markets for some or all dred or more. Many of these operate upon regular io THE AUTOMOBILE INDUSTRY AN EPOCH IN TRANSPORTATION II routes, in some cases giving daily service to all points miles distant." The length of such routes is commonly along them. For perishable commodities especially, from 20 to 45 miles." this service has effected a revolution in modes of market The farmers who are thus relieved, either wholly or distribution. To many cities, by far the major portion partly, from the work of haulage are often enabled to of the milk supply is brought by truck, in some in- devote themselves more fully to their work on the stances from producing areas which lie 5o or even 70 farm. In such instances, the motor truck not only low- ers the expense and increases the speed of transporta- 2,000 tion, but serves to facilitate the division of labor. Freed from the responsibility of hauling his products to the point of rail or water shipment and with the market 1,000 000 .... for them appreciably broadened, the farmer can now * .... - • •• . Carriages 800 apply himself in a larger degree to the production of 700 • • 600 those things for which he is best fitted, or, at any rate, ■ Wagons 1•• •••• 500 • %rm... • in which he is most experienced. For in agriculture, as 400 elsewhere, specialization is promoted by improvements

les 300 in transportation. hic Motor The ultimate result of the lower costs of production Vehicles f Ve 200 brought about by this increased geographical division a

ds of labor is, of course, to lower prices to the consumer. an This conclusion, it is obvious, holds only in so far as

100 competition operates. But the extension of marketing

Thous 90 80 areas ordinarily tends to carry with it some intensifi- 70 cation of competition. The speeding up of postal serv- 60 ice and the readier delivery by motor of supplies on 50 mail or telephone order all tend toward these same 40 ends: the stimulation of competitive influences in both 30 production and market distribution, the quickening of productive and distributive processes, and thus, ulti- 20 1904 1909 1914 191A mately, a greater abundance of consumable goods for Chart 2: Production of wagons, carriages, and motor vehicles. the community at large. 12 THE AUTOMOBILE INDUSTRY C AN EPOCH IN TRANSPORTATION 13 3. Other Influences upon Rural Life In other than strictly economic spheres, perhaps most important among the effects of the automobile has been the steady replacement of the old one-teacher "little red schoolhouse" by the modern consolidated school. Here again is seen the gain which results from the greater division of labor. In a one-teacher school, the pedagogue must needs be a jack-of-all-trades; he teaches all subjects and all grades of pupils. In the En automobile for every 3 to $ pelmet. [2223 be. eutomoblle foe every 6 I. e parsons consolidated schools, however, students may be sepa- Om automobile fm every 9 to II acme; rated by grades. Furthermore, instead of instruction One automobile ler every 12 to 14 acmes from one teacher in eight different subjects, students in Figure 2: NUMBER OF PERSONS PER PASSENGER AUTOMOBILE, IN THE vocational and other courses may often receive instruc- VARIOUS STATES, AS 01• JANUARY I, 1927. tion from specialists in particular fields. The average figure for the entire United States Is one car for every six persons. While the consolidation of schools began some thirty elementary education in rural districts are the strides years before the advent of the automobile," the move- that have been made in matters of health. The auto- ment could never have attained its present proportions mobile has steadily forced higher standards upon the without the use of the motor car and motor bus. There country physician. Again, with the market area broad- are in the United States today well over 12,000 con- ened, competitive influences have become intensified. solidated schools attended by 2,000,000 pupils." In Many farmers will no longer accept poor or mediocre the year 1924 alone, 1,424 new consolidations were medical attention when by an hour's or a half-day's effected; 200 of them are credited to the one state of drive they can obtain the best.18 Operations, and often North Carolina." Nearly half a million children are childbirths, are now undergone in urban hospitals in- transported daily by motor vehicles; and of the 8o,000 stead of on the farm; X-ray diagnoses and special treat- motor busses in the United States, about 30,000 are ments of various kinds may be obtained far more easily used by schools in rural sections." Often these busses than in former days. Thus some of the greatest dis- carry crippled children who could not otherwise attend advantages of rural as compared with urban life are for school at all. a number of persons largely removed by the presence No less striking than the improvement in systems of of the motor. 14 THE AUTOMOBILE INDUSTRY AN EPOCH IN TRANSPORTATION 1 5

4. Changes in Metropolitan Organization vidual motor trucks or their trailers. Especially is this true if any attempt is made to consider the cost of Turn now to life in the city. It, too, has been af- highways in estimating total expense, as the railroads fected. As in the country, the delivery of goods is quite logically have contended, on economic grounds, speeded up, various kinds of services are brought within ought to be done. But for short hauls, where the lim- easier call, and social intercourse between different ited distance traveled does not spread the railway's areas is promoted. Apart from the fact of its physically terminal and fixed expenses very thin per mile of car- different appearance—the virtual disappearance of the riage, the more flexible motor truck can be used to horse-drawn vehicle upon most thoroughfares and the advantage. And in deliveries to, from, and between great congestion of traffic in the downtown center—the railroad freight houses the truck finds one of its great- contrast between the city of today and the city of est fields of usefulness. Thirty different railroad com- twenty years ago is perhaps not nearly so marked as panies now use trucks, for terminal haulage in various is the case with the country district. None the less, cities," while the New York Central lines alone employ substantial changes may be noted. 600 trucks in 5o different uses." In commercial spheres within the city and its sur- By thus relieving freight congestion in the city, as rounding area, the automobile has effected a revolution well as by affording swift and economical delivery serv- in methods of market distribution. The motor truck, ice within a radius of 5o to 6o miles, the motor truck in particular, by complementing the work of the rail- enables the vast interchange of products necessary be- road, makes possible the handling of an immensely tween the factories, wholesalers, jobbers, and retailers greater quantity of freight by single terminals. It may that serve the present great metropolitan areas. To- here be noted, in passing, that while the automobile gether with the passenger car, the truck has promoted provides essentially individual transportation of both the cheaper, easier, cleaner living of thousands within passengers and merchandise, it is often not as an indi- a radius of 15 to 20 miles beyond the city's corporate vidual unit, but as a component of a coordinated trans- limits. Indeed, in several cities, it has extended these portation system that it accomplishes some of its most limits to more than double 20 miles. A large depart- effective work. The truck is not to be regarded pri- ment store in , for example, delivers packages marily as a competitor of the railroad, but mainly as to towns 42 miles away from the City Hall. Here a an adjunct to it. The long-haul movement of freight telephone call takes the place of a drive to town. One can be accomplished far more cheaply in railroad cars has only to recall the obstacles a 40-mile distance im- drawn by a locomotive over smooth rails than in indi- posed a few decades ago to realize the great changes i6 THE AUTOMOBILE INDUSTRY AN EPOCH IN TRANSPORTATION '7 that have occurred in the broadening of market areas, communities at least, the growth of urban areas could the specialization of business units, the concentration never have taken the same broad course. of huge populations about metropolitan centers. But this increased massing of population about com- 5. The Development of Post Roads decentrali- mon commercial centers has meant a relative The extent to which suburbs may grow or motorists of urban population so far as the inhabited areas zation may tour is conditioned largely by the character of a themselves are concerned. The city is no longer merely country's highways. It is sometimes said that the auto- a thickly settled district where a great congregation mobile has caused good roads; sometimes, that the con- of people all live and work and stay. Many who work struction of good roads has caused the great develop- there do not even live within its limits, and a number ment of the automobile industry. Both statements are of those who live there remain within its borders but a true; here, as so often in economic matters, cause and part of the time when they are not at work. The effect have constantly interacted. The great strides countryside is not only brought nearer the city; the which the country's highway system has made in the city itself becomes, in all but its corporate name, indeed last twenty years are seen in Chart 3. Through rapid a part of the surrounding country. New York is no and widespread local, state, and Federal activity, the longer merely Manhattan, Brooklyn, and the Bronx; United States within the last fifteen years has built a it is also Long Island, Rye, New Rochelle, and indeed a part of Connecticut and New Jersey. The same is system of splendid highways which would delight the true of other cities, many of them communities much staunchest Jeffersonian advocate of internal improve- smaller than New York; as economic rather than cor- ments. porate areas, they have expanded far beyond the nar- In 1916, Congress passed the Federal Aid Road Act, rower limits of a generation ago. which appropriated $75,000,000 for the purpose of All this is not, of course, due wholly to the automo- cooperating with all states that desired to build rural bile. The street car, the elevated, the subway, the post roads. Towards the expense of such highway con- interurban, and the steam railroad had all contributed struction of a "substantial" character, the Federal gov- to this development and initiated it before the automo- ernment agreed to pay half, provided the states as- bile came into use. In large measure, it is only in sumed responsibility for the expense of maintenance conjunction with these other modes of transportation and provided that all roads constructed should be "free that the motor car and motor truck have accelerated from tolls of all kinds."" The maximum amount per the expansion. But without the automobile, in many mile which the Federal government could contribute

Iswfwmotomwmerovowwwierfneiatirwrwramipmen - ; i8 THE AUTOMOBILE INDUSTRY AN EPOCH IN TRANSPORTATION 19 60 been approved for construction, while 56,717 miles of highway have already been completed under the terms 500 of the act. The United States now possesses, all told, a grand total of slightly over half a million miles of surfaced road.24 400

350 6. The Motor's General Social Influence Finally, among the several effects of what might be termed the motorization of America, we have briefly to mention the more general influences which the motor U) 250 car is exerting upon the country as a whole. C (1) It is a commonplace of history that every means of 200 communication which brings the inhabitants of different geographical areas more closely together inevitably tends, in time, to exercise a certain broadening influence upon the persons whom it thus affects. The automobile 150 has not merely changed the physical appearance of our country, it has not only lined our rural areas with sur- faced roads and crowded our city streets, but it is also doubtless altering the characters and the viewpoints

100 of those who use it. Like the stagecoach, the railroad, 1921 1926 1904- 1909 1914 and all other improvements in transportation, it enables Chart 3: Growth of surfaced road mileage in the United States. the readier observation and comparison of different was set at o,000; this was later increased by amend- places and practices; it greatly encourages social inter- ment to $20,000 a mile. The total amount appro- course. priated over a nine-year period ending in 1925 was How substantial an effect will thus ultimately be ex- $615,000,000;22 for the fiscal year ending June 3o, ercised upon our social life can hardly now be told. It 1925, alone, the sum of $75,000,000 was authorized." is still too early even to hazard a guess. Changes in In all, 184,000 miles of Federal Aid roads have to date social and political organization ordinarily lag behind

20 THE AUTOMOBILE INDUSTRY changes in industry. Secretary Herbert Hoover" re- gards the fact that the automobile makes it possible for the business executive to supervise many activities which are geographically removed from the central es- tablishment, and which previously would not have been essayed, as one of the most significant of the motor car's contributions to economic life. Possibly social or even political results no less important, but more subtle in their working, may well follow. The important fact to note, however, is that the common man in America has attained a mobility that was before unknown. The recent pilgrimage to Florida during the real estate boom of 1925-1926, for example, is a case in point; it could Figure 3a: A Main Highway in New York State, never have occurred, on anything like the same scale, Near Buffalo, in 1912. in the absence of motor transportation of both pas- sengers and freight. The extent to which both ordinary and special travel may be still further stimulated is seen in the fact that the system of state and Federal highways now being built will, when completed in accordance with the plans already approved, "connect practically every city and town of 5,000 or more inhabitants in the United States. Practically 90% of the nation's population will live within ten miles of a Federal Aid road, and practically all the remaining io% will be that close to a state road.' It is estimated that even now approxi- mately 40,000,000 people spend at least a part of their vacations in motor travel." Whatever the accuracy of this estimate, anyone who travels the highways even Figure 3b: A Typical New York State Road, Near Buffalo, in 1927. occasionally may himself see the reality of the fact. Courtesy W. H. Brands]. Buffalo

21 22 THE AUTOMOBILE INDUSTRY

Americans are seeing America. Like the railroad, the steamship, the telegraph, the bicycle, and the trolley car, which came before it, but upon a scale and with II a rapidity never before known, the motor car during the past two decades, to use the language of Charles and Mary Beard," has "made travel and communica- THE EVOLUTION OF MASS PRODUCTION tion cheap and almost instantaneous . . . . drawing i. Manufacturing Proficiency and Commercial Devel- people of similar economic status and parallel opinions opment into cooperative activities." Such are some of the effects of the industry of which WHEN James Watt, unable properly to bore the cyl- the following chapters of this book will treat. The inder for his first steam engine, succeeded finally in social development just sketched is the result of a series hammering one out, he stated that "at the worst place of inventions, first developed principally by Europeans the long diameter exceeded the short by three-eighths rather than Americans, which, about the beginning of of an inch."" John Smeaton, who examined Watt's this century, gave rise to a new product capable of be- engine and who had himself devised a boring machine ing manufactured in quantities. But the consequences in 1869 for the Carron Iron Works, declared that which have ensued involve also the remarkable growth "neither the tools nor the workmen existed that could of a new market, the organization of manufacturing manufacture so complex a machine with sufficient pre- enterprises, the devising of production methods, and cision."3° Finally, after ten years of painful but deter- the formulation of business policies. To these several mined effort, and aided by the mechanical genius of matters we may now turn our attention. Wilkinson and the business genius of Boulton, Watt saw his engine a commercial success. Today, in motor car factories, the extreme limit of inaccuracy which the inspection permits on several thousand dimensions of the product is set at one one- thousandth of an inch. Some inspections are for one- tenth of one-thousandth of an inch, or even less. It is truly a far cry from Watt's three-eighths of an inch error to such modern precision. But these mechanical and metallurgical miracles did not come so rapidly as

23

--„,—,.—.,,,,,rwrszrmitwiekirwrTwrmvwftViWOGIM;ZWIMNMFiwwrarv•.--- 24 THE AUTOMOBILE INDUSTRY EVOLUTION OF MASS PRODUCTION 25 the bare facts can be related; long years of trial and 168o, Newton proposed a steam carriage to be propelled error, experiment and struggle, intervened. The de- by a "rearwardly directed jet of steam." And Nicholas tailed account of the development of modern methods Joseph Cugnot, a captain in the French army, in the of automotive manufacture will be reserved for another year i 769 actually built a steam carriage which is still volume; but the evolution of mass production will here housed in a Paris museum. In , both Syming- be sketched at sufficient length to enable a detailed ton and Murdock, the latter an assistant of James Watt, analysis of the growth of the automobile market to be and in America, Oliver Evans, all built experimental undertaken. For although the manufacture of a prod- vehicles or models about the close of the eighteenth uct depends upon the demands of the market, it is no century. Richard Trevithick patented a steam vehicle less true—in the case of the automobile, perhaps more in 1802 and a year later constructed one that actually true—to say that the extent of the market rests upon ran. It steered with a handle bar, and was equipped the effectiveness with which the product can be manu- with changes of gearing and with a differential device— factured. a clutch on the which enabled one driving wheel to run faster than the other in making turns.8' 2. Invention and Early Construction In succeeding years, principally between 1810 and If it be asked, "Who invented the automobile?" it is 183o, Anderson, James, Gurney, Hancock, and Ma- impossible to answer the question. The only accurate ceroni all built road carriages in England. By 1831, reply is, "No one." Far from being the product of a several steam coach lines were in operation, but they single mind, the motor car is not even the product of were soon abandoned." men within a single country, nor of a single generation After 1831 occurred a period of inactivity in steam of men within several countries. Its history gives no road vehicle history. But meanwhile the attention of support whatever to any form of the "heroic" theory inventive minds was turned toward the development of of invention, which attributes to one man the complete the internal combustion engine. Here again may be or practically complete credit for the development of seen the successive contributions which several gen- a particular contrivance. In so far as prior credit for erations often make in the development of an effective the mechanical development of the automobile can be mechanism. Like the steam engine, which dates back distributed among individuals, however, it belongs to to the Greeks, the gas engine "invented" by the French- Europeans, not to Americans. man Lenoir in 186o represented the culmination of a As early as the fifteenth century, Leonardo da Vinci development which actually started several centuries glimpsed the possibility of power-driven vehicles. In before. Following Lenoir came the contributions of 26 THE AUTOMOBILE INDUSTRY EVOLUTION OF MASS PRODUCTION 27 Siemens, Hugon, Otto, and Brayton. And shortly foreign development sufficiently to list accurately even Daimler, Benz, Maybach, and others added the fruit those chiefly and directly responsible for the automo- of their experiments." bile in European countries. But experiment continued Thus by 1885 not only had the internal combustion there during the late eighties, the nineties, and the early engine been brought to a stage of working effectiveness, years of the twentieth century. Foreign experiment but an engine which could vaporize its own fuel had not only antedated all American production, but even been developed. The internal combustion, hydrocar- for some years after the industry was here established, bon-type motor, the steam engine, and the electric mo- American designers copied foreign practice carefully tor and battery, which had been developed through and extensively. One of the American pioneers much the same successive process of discovery and chuckles now as he relates how in the summer of 1900 advance both by pure scientists and practical contrivers he went to France, where he posed as an American over a period of many decades, all were available, by capitalist who desired a vehicle for use on roads around 1875-189o, for incorporation into road carriages. In his Newport estate. He ordered a small single cylinder the various countries of Europe, notable among the sev- DeDion-Bouton, which was shipped to Newport in ac- eral pioneers of this period were Daimler, Benz, May- cordance with his instructions; then it was brought to bach, Krebs, Panhard, Levassor, Serpollet, DeDion, his factory, immediately taken apart, and carefully Bouton, Gibbon, and Roots. In America, the pioneers studied. in experiment—steam, electric, or internal combustion But the fascinating story of the successful struggles —were Duryea, Olds, Haynes, Winton, Ford, King, of those early years to build effective road vehicles Maxwell, Apperson, Riker, Clarke, Stanley, White, belongs rather to the history of invention than to this Franklin, and Selden. All these men actually con- brief chapter upon the evolution of mass production structed cars between 1886 and 1899, with the excep- methods. Let it suffice here to say that both through tion of Selden, who did not build a complete vehicle the copying of foreign designs and through a great deal until later. Of his patent filed in 1879 and issued in of more or less original work as well, a group of Ameri- 1895, however, something will be said in another can experimenters—call them erroneously "inventors" chapter. if you will—drawing upon the mechanical, chemical, In this enumeration of "inventors" no pretense to and electrical developments of decade piled upon dec- anything that approaches completeness, or indeed ade, succeeded in building practical self-propelled road proper emphasis, is made for countries other than the vehicles, chiefly of the internal combustion type." It United States. The writer has not as yet examined the must not, however, be thought that these men do not

28 THE AUTOMOBILE INDUSTRY EVOLUTION OF MASS PRODUCTION 2 9 deserve great credit for their achievements even though they all built upon the work of those who preceded them, and in some cases copied their contemporaries as well. The initial construction of the cars they built was incredibly difficult. Furthermore, they worked steadily to improve their designs; such experimenters as Olds and Duryea built one car after another. Although they were not inventors in the ordinary sense of the term, this great and steady improvement of design and con- struction involved the constant exercise of the "cre- ative" faculties in a very real sense, that of the synthesis and skillful application of more or less well-known prin- ciples in order to produce results of an order higher than was known before."

3. Rapid Development of Manufacture These early "horseless carriages" of the period 1886 to 1899 were not "manufactured" cars. They were the crude products of home or workshop experiment. Like Watt's first steam engine, they were built with tools and machinery improvised for the occasion. Winton and Olds made many of the parts for these first cars Figure 4: FOUR EARLY GASOLINE AUTOMOBILES OF 1893-1899 AND themselves simply because factory-built automobile THEIR BUILDERS. parts were then unknown. Ford made his first cylinder rather, "to be more accurate, the motor was simply not out of the exhaust pipe of a steam engine. He bought cooled at all."" Duryea's car, which antedated the iron work for the frame of the carriage; also the Ford's," was likewise crude; and an 1899 gasoline car, seat and springs. Both front and driving wheels were one of several that had been built by Olds, and styled from bicycles. The flywheel he had cast from a pattern an "improved model," was controlled by a lever which of his own design. The machine was air-cooled, or connected, through rubber tubes, with pneumatic

T-77,,,17.1-774(71.11rf77Tt. ?::-17.141141a1111101100.7;:'

3o THE AUTOMOBILE INDUSTRY EVOLUTION OF MASS PRODUCTION 31 clutches and other devices so complicated in design and vestige of evidence that horseless carriages were once operation that their fabrication upon a commercial scale constructed by individual mechanics, each working with was not successful. This model was soon entirely aban- a fellow tinkerer in barn or early workshop, has disap- doned in favor of a different type. peared from the industry. Nowhere has the division Thus, although there were perhaps 300 automobiles of labor been carried further; nowhere has an almost built in the United States between 1886 and 1898, inconceivably complex task of manufacture come to be there was no automobile manufacture. At best, as the executed with greater dispatch; nowhere have "thought, Horseless Age had said in 1895, the industry was "in skill, and intelligence"" been transferred more com- an embryonic state." It was not sufficiently important pletely from worker to machine. even in 1899 to be listed in the census under a separate It is something of an anomaly that the product which heading. But by the end of 1926, it had attained such represents one of the mechanically finest, the most cun- a rank that the shipment of its products, together with ningly ,devised, and the most delicately fitted of all those of the other industrial activities to which it has contrivances which man has ever made is constructed directly given rise, provided an annual total of 3,000,000 with the exercise of virtually no personal craftsmanship railroad carloads of freight. whatever on the part of most workers engaged in its Such an accomplishment has not, of course, taken manufacture. While this statement requires some place under the virtual handicraft methods employed in qualifications, it will in the main stand. The develop- the early workshops of Duryea, Olds, Haynes, Winton, ment of those very methods which have made possible Ford, and others. It is inconceivable that such a devel- the expansion of the industry has tended, and still is opment in so brief a span of years could have occurred tending, towards the reduction of human operations to under any form of industrial organization other than their simplest terms through the use of automatic and the factory system as we know it today. semiautomatic machinery. All this is not, of course, Both the extent of this development and the rapidity entirely new with the automobile industry. But as the with which it has taken place are difficult to realize. scale of production has increased, the extent to which and the directions in which these tendencies have devel- If Europeans chiefly "invented" the automobile, Ameri- oped have greatly multiplied. With 10,000, 15,000, cans certainly developed the methods required for its now even 70,000 workers in a single factory, the rigor- mass production. Automobile manufacturing, as dis- ous application of the division of labor, concomitant tinguished from experimental building, commenced in with the development of special machinery for each 1900. Today, two and a half decades later, every operation, knows virtually no limits. 32 THE AUTOMOBILE INDUSTRY EVOLUTION OF MASS PRODUCTION 33 which is raised a foot or two above the floor. As the frame moves slowly past different groups of workmen, the , springs, engine, transmission, steering gear, The Overland assembly room in r911. Note how the men wheels, truss rods, fenders, battery, body, radiator, gaso- bring the parts to a central point for assembly. line tank, running boards, hood, and lamps are fastened to it; and "off the line" at the other end of the building thirty or forty minutes later, under its own power, comes a completed car. One man performs one oper- ation, another man, or a set of men, another. Pro- gressive assembly systems of this kind, which now pre- vail to a greater or lesser extent in all the largest fac- tories, represent the extreme limit to which the exten- sion of the management's control over productive oper- ations can be carried. Not only are the design, shape, size and quality of the work predetermined, but the rate at which each operation must be performed by the workers is rigidly controlled by a power machine, which even may be driven from another building. In some

The present type of conveyor assembly, in which the frame starts its of the larger factories, conveyor systems are likewise journey at one end of "the line," moves past the workmen, and emerges as a finished car at the other end of the line. "Progressive assembly" was used in the subassembling of various parts and units, adopted in the Willys-Overland plant in 1913.1914. such as the radiator and the complete motor.

Figure 5: ASSEMBLY METHODS BEFORE AND AFTER 1912. 4. Historical Basis of Present-Day Methods of Pro- What is, however, new with automobile manufac- duction turing organization is the progressive assembly of parts, The great development of these more refined meth- with the use of mechanical conveyors that carry mate- ods of power production has taken place only within rials past the men as they perform their work. This method of manufacture is now so well known that it about the past decade. Indeed, one of the most striking hardly requires description. At one end of the factory things about the , and one of the building, an automobile frame is placed upon a track greatest difficulties which still besets every automobile

s'Alliiiii11111111M= THE AUTOMOBILE INDUSTRY 34 EVOLUTION OF MASS PRODUCTION 35 manufacturer, is that production methods are constantly uct was due simply to the employment of an excellent in process of alteration. Unpredictable changes have system of manufacture, developed in order to supplant always been characteristic of modern machine produc- skilled hand work by machine. tion, but nowhere has the rate of change been more But in firearms manufacture, to avoid the careful rapid than in this branch of manufacture. Yet though reaming and fitting of the product when it was assem- the various technical methods now in use are but re- bled, an extraordinary precision of parts was required. cently developed, they are the product of an evolution Whitney, Hall, and North began this development be- begun over a century ago, and they admirably illustrate tween 1798 and 1814, although the concept of inter- the cumulative nature of nearly all development in in- changeable parts, and unsuccessful attempts to utilize dustrial technology. them, date somewhat earlier." Albert Eames, Thomas The possibility of applying the present technique of Warner, and others improved upon their work before motor vehicle production, in all its varying phases, rests the middle of the century. Eames developed the manu- fundamentally upon one great principle earlier applied facture of interchangeable parts in carbines and pistols in several other industries: the standardization and and in 1842 began the manufacture of a new model interchangeability of fabricated parts. In England, percussion musket at Springfield. In 1853, in a demon- Samuel Bentham and Marc Isambard Brunel, father stration before a British military commission, ten of of I. K. Brunel, designer of the steamers "Great West- these guns were dismantled, the parts mixed, and suc- ern" and "Great Eastern," developed, between i800 cessfully reassembled. Exactly 5o years later, it may and 1808, a group of machines to make ship blocks at be noted, Henry M. Leland took three American-made Portsmouth. In collaboration with Henry Maudslay, cars to the Brooklands race track, in England, these two men built 44 machines, "each performing its ran them around the track, had them dismantled, with- part in a definite series of operations."" With these drew 91 parts from the heap, substituted 91 identical machines, ten unskilled workers could produce as many stock parts, and had the cars reassembled with screw blocks as 110 workmen. Although the blocks thus drivers and wrenches as the only tools employed. The produced were identical, the activities of Bentham and cars were then immediately driven 500 miles around the Brunel did not aim primarily at attaining interchange- course at an average speed of 35 to 4o miles per hour. ability of parts. There existed in the manufacture of Between about 185o and 1875, then, the interchange- wooden pulley blocks no need for a highly accurate able system of manufacture—making the separate parts turning of parts in order quickly to accomplish an of a product in quantities through the use of special assembly, and the substantial uniformity of their prod- tools, and next assembling the finished product from 36 THE AUTOMOBILE INDUSTRY EVOLUTION OF MASS PRODUCTION 37 identical sets of standard parts without any reaming, ards both of precision and of tensile strength are requi- filing, or fitting of individual pieces—had been widely site. These standards have been attained not through applied in factories making watches, agricultural im- any greater skill in the labor applied directly to the plements, sewing machines, railroad cars, locomotives, parts tooled or machined, but through the develop- and other products. The bicycle industry soon fol- ment of highly specialized machine tools, better mate- lowed, and by 1900, this branch of mass manufacture rials, and various calipers and gauges which can measure could boast one establishment which employed 3,800 to within a thousandth of an inch or less. Coupled with persons. the progressive system of assembly and its conveyor Meanwhile, between about 1800 and 1875, Mauds- methods, such standards of precision permitted the rapid lay, Clement, Whitworth, Nasmyth, and others, in and cheap assembly of a multitude of parts into one England, and Lawrence, Howe, Stone, Gridley, Billings, finished product. Sold steadily at lower prices, this Brown, Fellows, and many others, in America, had laid new product soon found a great market. the basis for the more recent machine-tool develop- 5. Early Productive Organization ments of the late nineteenth and early twentieth cen- turies. The slide rest and screw cutting lathe, the The attempt to produce on a large scale was made planer, the steam hammer, the milling machine, the by American entrepreneurs almost from the first, once turret lathe, the gear shaper, and, of course, standard the crudest experimental stages of the horseless carriage taps and dies, are only some of the present-day tools were past. The Olds Motor Works at Detroit and Lan- for which industry is obligated to these men." sing was the pioneer, making 1,400 vehicles in 1900, Upon this dual basis of an already developed system 2,100 in 1901, 2,500 in 1902, and about 4,000 in 1903. of interchangeable manufacture (the so-called "Amer- By 1904, this plant attained a production of as high as ican system") and the machine-tool development of a 4o complete vehicles a day. The Cadillac Company, century in England and the United States," the auto- likewise, came shortly to make 3o or 4o cars a day, mobile industry then built. But the difference between and visitors at these two factories declared that their an automobile and a bicycle or a sewing machine is activities "passed belief in sober fact." great. Not only has the one several thousand parts as There was expressed much skepticism as to whether compared with the other's several hundred, but the production upon this huge scale could be maintained. many reciprocating parts of the automobile chassis Few persons were willing to buy stock in the motor travel at much greater speed than do those of other con- industry even after its profitableness to several pro- trivances. Thus in many of its parts far higher stand- ducers was evident. The industry was thus obliged to 38 THE AUTOMOBILE INDUSTRY EVOLUTION OF MASS PRODUCTION 39 cause it offers a higher rate of return, risks included, than do other industries. But in new industries no actuarial computation of risks is possible; and in the automobile industry the risks seemed to most outside investors too great to be undertaken. Thus the oppor- tunity for profits did not immediately result in any considerable flow of productive resources toward mo- Figure 6: THE OLDS MOTOR WORKS IN 1903. In that year nearly cow cars were produced by this factory, then located in tor manufacture. And certainly few funds elsewhere Detroit. Marine gas engines were also made there. invested were "withdrawn" and thus diverted to the finance itself almost entirely out of earnings. Each automobile industry. More will be said on this subject company started in a small way, turned over its capital in other chapters." as quickly as possible, and immediately reinvested what- But managerial and organizing ability did readily ever profits it received. While several companies by gravitate towards this new industry. The men who 1905-1906 thus came to produce upon a fairly large took advantage of this opportunity to pioneer were in scale (2,000, 3,000, or 4,000 cars a year), they all did the main young, and for the most part possessed little so by expanding their facilities through such reinvest- or no capital themselves. Their immediate capital ment of earnings. There is on record during this early needs they financed in two ways. Their initial fixed period no instance of a company's launching itself as capital requirements were met by the relatively small a large producer during its first year of business; pub- sums which they and their few backers originally put lic confidence was so lacking that the requisite capital into the enterprise. Their working capital requirements simply was not forthcoming. In 1904, even the oldest were met in part by the funds received from dealers trade journal of the industry, the Horseless Age, warned as deposits upon orders," in part through buying parts prospective investors against succumbing to any "pro- and supplies on credit from various foundries, metal moters' gilded dreams of 5,000 men in a single factory." working and wood working establishments. For in the That there is often comparatively little investment early days of automobile manufacturing, as distin- of outside capital in new manufacturing industries has guished from small-scale, experimental shop work, rela- not generally been realized until recently. The econ- tively few of the parts for the car were made within omist is too accustomed to think of an industry as being the plant of the "manufacturer." His business was launched and expanded as the result of capital saved primarily one of assembly. He bought on credit from by individuals and then "put into" that industry be- the parts makers, and he sold for cash to his customers, 40 THE AUTOMOBILE INDUSTRY EVOLUTION OF MASS PRODUCTION 41 the automobile dealers and distributors. Thus a large whim in drawing up specifications for his car, was all part of his working capital was obtained through buy- that dictated the dimensions and quality of the parts ing on 3o-day or 6o-day open accounts; his business thus made to order. was in effect financed by the parts makers." These lat- 6. Development of Standardization in Chassis Parts ter for the most part exercised no degree of control whatever over the manufacturer to whom they thus By 191o, conditions had become so bad in this re- advanced materials and supplies, although occasionally spect that one parts maker fabricated 800 different they obtained representation in the directorate of the sizes of lock washers, the various automobile manufac- automobile company. turers in the aggregate employed 1,600 different sizes These parts makers, the producers of iron castings, of steel tubing, and 135 different analyses of steel, in of steel tubings and shafts, of bearings, springs, bolts all, were being specified. It was soon seen that manu- and nuts, of engine, axle, and transmission parts," and facturing was far more difficult and costly than was of radiators, lamps, tires, wheels, bodies, and the hun- necessary, and the automobile makers themselves took dreds of other parts and accessories entering into the action. Under the leadership of Messrs. Howard E. construction of a car, manufactured in most instances Coffin, Henry Souther, Coker F. Clarkson, and others, not to stock, but upon the order of the automobile the work of the Mechanical Branch of the Association maker. Most of these parts concerns were engaged in of Licensed Automobile Manufacturers, followed by supplying other lines of business than automobile manu- that of the Society of Automotive Engineers, eventually facturing. Some of them, however, came soon to cater brought order out of chaos. Instead of 800 sizes of principally to the new industry. The Timken-Detroit lock washers, 16 standard sizes were adopted. In place Axle Company, for example, though originally located of 1,600 kinds of steel tubing, 210 types were specified. in Canton, Ohio, moved to Detroit because the largest The number of alloy steels employed was reduced to market for axles lay there." But while some of these less than 5o." firms made running gears and other parts and assem- The standardization of parts thus brought about, blies of their own design, most of them continued to it is interesting to note, resulted in neither the stagna- make special parts for each manufacturer they sup- tion of mechanical designs nor the stifling of individual plied; and the parts thus fabricated for any particular initiative. Competition and variation in major features automobile maker were absolutely unique in design, of design, and in special combinations of designs, con- shape, size, and weight. During this early period, the tinued. There was eliminated only the waste occa- automobile engineer's discretion, indeed often his mere sioned by the fact that each enterprise had gone its

EVOLUTION OF MASS PRODUCTION 43 own way in the specification of certain parts, the sizes or patterns of which were immaterial and which in any case were ordinarily out of sight in the completed chassis. Probably no more interesting example of the members of a competitive industry acting in concert to attain more orderly and less costly conditions of pro- duction for the industry as a whole has ever offered itself. 7. Development of Internal Plant Economies

HENRY M. LELAND HENRY SOUTHER Manufacturing expenses were steadily lowered in Famous for the application and Chairman of the first committee refinement of the "American Sys- on standardization, Society of other directions as well, and along with this cheapening tem" of interchangeable standard Automotive Engineers, two; later parts in automotive manufacture; president of that body; initiator of process the quality of the product was constantly general managerof the Cadillac of S.A.E. standard steel and other Motor Cateampanrranl9oa metal specifications. to 1917; ounder o the Lincoln improved. The lower prices at which it became pos- Motor Company. sible to sell the more serviceable vehicles greatly ex- panded the market for them," and each expansion of the market resulted in an enlargement of the scale of production, the discovery of better manufacturing methods, and again lower prices." Soon, with the steady broadening of the market for medium-priced and low-priced. cars and with the result- ant increase in the scale of production in many plants, a number of companies began to make many of the more important parts of their chassis within their own factories. Striking among the causes of the constantly lowered production costs which they came to enjoy was HOWARD E. COFFIN CORER F. CLARKSON the continuous development of new machinery. Hardly President of the Society of Auto- Manager of the Mechanical motive Engineers in zoo, when Branch, Association of Licenced a year of the quarter of a century of automobile manu- the standardization work under- Automobile Manufacturers; secre- taken by that body was begun; tary and general manager, Society vice-president Hudson Motor Car of Automotive Engineers. facture has gone by in which important new devices Company. have not been developed. Some of these have been

Figure 7: FOUR OF THE LEADERS IN THE DEVELOPMENT OF AUTOMOTIVE STANDARDIZATION.

42

44 THE AUTOMOBILE INDUSTRY designed by machine-tool building firms, which, about 1905 when the future of the industry seemed to most Vigivilil of them as being probably assured, came forward with A '''''''''.1#.*:;%; . ' .•.,- new devices, while others have been invented within i -07,L,er. --."'-;•': ' . '` t , -7 4-, r*., • . 41,.. I.,,,.-4„br. the automobile factories themselves. In 1903, to cite a few examples, a multiple drill press 40..44It11 iiiik itkpedikiu,,,. . " was introduced to work cylinder blocks and heads; in JP the same year were developed also a machine to grind AlachInery Irr -1 • int!, --St ■1•1•.!' r no. the cylinders themselves, a lathe to turn cam shafts, and a vertical turret lathe specially designed to turn flywheels. While all these devices increased produc- tion, figures for the rates of increase are not available. For more recent improvements upon these devices, however, there have been collected by Mortier W. LeFevre" several records of accomplishment. A newly developed automatic machine, for example, has supplanted the cam shaft turning lathe. It is equipped with either eight or twelve correctly shaped cams which move the cutting tool against the cam shaft ■ A i nd, r iir, ' Olt: to be shaped for either a four-cylinder or a six-cylinder ,f h 1- a III III. In HMI, I' iiy iif ;pp .,f n !• daily—I:Ivy-Ira plant. engine. The machine turns all eight or twelve cams I ■■!,1 1111,1 (which occupy different positions on the shaft, relative to one another) at one operation, and stops itself when the operation is finished. The resulting output is eight or twelve times greater per man employed in this work. That is, the output is eight or twelve times greater per man employed directly in automobile manufacturing, ■1, ,, is n il, I, although this figure, of course, takes no account of the

capital cost of the new machine itself, which is doubt- Figure 8: FOUR VIEWS OF MACHINERY AND MANUFACTURING METHODS less somewhat greater than that of the old one. ADOPTED SINCE 1912. 45 46 THE AUTOMOBILE INDUSTRY EVOLUTION OF MASS PRODUCTION 47, Likewise, the vertical turret lathe introduced in 1903 zation of work is frequently split up; machines are to turn flywheels has since been replaced by a much located not according to kind, but according to their more effective unit. When first introduced, the latter function in turning out the finished product. Thus the machine, a lathe of the horizontal type, performed more fabrication of individual parts, the making of sub- than twice the work of the old. Still more recently, a assemblies, and the work of final assembly proceed not new tooling of this lathe has greatly improved the only progressively but with the minimum of trucking quality of the product as well. and conveyance of materials. Many other similar instances might be adduced, the The total net gain in productive effectiveness which saving in labor within the factory often running higher has resulted from the rapid introduction and continuous than in the cases cited. Perhaps as important as the improvement of these several radically new methods of savings through the constant development of new ma- production cannot be told with accuracy. Compari- chinery are those due to the devising of methods of sons of total factory costs for identical units of product material routing, machine layout, and assembling. The are not available. To compile a significant index num- whole internal organization of the large factory, in this ber of automobile selling prices running over even a 10- new industry, revolves around the concept of pro- year or I5-year period would be difficult in the extreme, gressive performance through the decentralization of for with the design and construction of nearly all cars productive operations. What is meant by this is that having changed every year, no series of comparable the automobile industry was the first to apply the prin- units exists. One or two individual comparisons, in ciple of scattering its machine equipment throughout terms both of price and labor costs, may, however, be the production process, regardless of the fact that sim- essayed to indicate very roughly the probable extent of ilar machining operations are thus not performed by the economies that have been effected. the same department of the establishment. In the fab- In 1904, about four years after the industry really rication of older mechanical products," the various started, a five-passenger Packard of 92-inch machines of one general type were all arranged about a wheel base, weight 2,200 pounds, and carrying a four- common center, and to this department was brought for cylinder, 24-horsepower engine, sold for $7,000, with- execution all work which was to receive machining of out top or . Twenty years later the same this given character; all milling machines, for example, company produced a five-passenger touring car of 126- would be located in one department, and all milling inch wheel base, weight 3,65o pounds, carrying a six- operations would there be performed. But in the auto- cylinder, 27-horsepower motor, which sold for $2,585, mobile industry, this centralized departmental organi- with windshield, top, and full equipment. With allow-

48 THE AUTOMOBILE INDUSTRY EVOLUTION OF MASS PRODUCTION 49 F, advertised as "the most advanced type of automobile Litt' honing, cp.- tool. Price, 000 !without equipment I. construction," weight 1,400 pounds, with a "matchless 2-cylinder motor," sold for $1,200. Two decades later, the Ford model T touring car, weight approximately 1,65o pounds, with a four-cylinder, 22-horsepower mo- tor, and equipped with top and windshield, sold for $290. This was the advertised price, without demount- able rims or self-starter, but the car of 1904 was not Font touring car, 1904. l'rice, St,roo (without equipped with these features, either; with electric self- equipment). starter and demountable rims, the 1924 Ford touring car sold for $375. Again ignoring improvement in 1 Packanl touring car. 1924, Price, $2.85 (with full design and performance, but allowing for changes in equipment). money values, this represents a price reduction of about 85%. If it be assumed that the relative decrease in retail value represents relative gain in productive effect- iveness, what this comparison shows is that in 1924 six better cars could be produced for the amount of labor besting (At. 192.1. rriCe 52v0 (SS i110 ,111 ,01 alter I. and capital required to produce one poorer car in 1904. For somewhat shorter periods, a comparison of labor hours, "man hours spent per car," though defective in that it ignores the increased mechanization of produc- THE DIFFERENCE OF Two DECADES. Figure 9: tion which has steadily taken place over the entire ance for the change in the purchasing power of money period,53 gives results equally startling. These figures, over this period, what this comparison indicates is that for two establishments, are as follows:" in 1924 a vehicle greatly improved in performance

qualities and riding comfort, and enjoying markedly MAN HOURS PER CAR lower upkeep charges, sold for less than 25% of the YEAR Establishment A Establishment B price which a lesser vehicle of the same make com- 1912 1,26o 4,664 manded twenty years before. Similarly, to take an 1915 3,241 533 example in the low-priced field, in 1904 the Ford model 1923 813 228 5o THE AUTOMOBILE INDUSTRY EVOLUTION OF MASS PRODUCTION 51 No effort should be made, of course, to compare these In the older days, that is, before 1906-1908, a dis- two establishments, since one clearly manufactures a tinct advertising advantage was thought to inhere in the different type of car than does the other. But the year- fact that a company made nearly all the parts for its to-year decline in man hours in each case is astonishing, product. Some firms not only fabricated a number of Intermediate years above omitted show approximately their own parts, but made exaggerated claims as to the the same proportional decreases; and while in certain complete adoption of this policy. The Maxwell-Briscoe respects man hours do not afford so good an index to Company, in an advertisement in the Motor World in productive efficiency as do selling prices, their compari- 1904," for example, declared that "the Maxwell plant son nevertheless affords positive proof of the highly . . . . is not an assembly plant, but one where every dynamic character of conditions in such an industry part of the Maxwell automobile is actually made under as this, even a quarter of a century after its develop- the direct supervision of the designer, Mr. J. D. Max- ment began. well." Similarly, about the same time, the makers of the advertised that "excepting only the body, 8. External versus Internal Economies tires, and spark coil, every part of the Rambler touring The chief reason for the great reductions in manu- car is made in our own factory."" But with the devel- facturing costs which have obtained is that new ma- oprhent of large and well-known parts making firms, chine tools of the sort just described were developed such as the Continental Motor Corporation, the Brown- for use in the motor car factories themselves. But Lipe Gear Company, the Timken-Detroit Axle Com- another reason, related although somewhat different, pany, the Hyatt Roller Bearing Company, and others, is that, merely because of the increase in the volume this pretense was dropped, and after about 1909-1910, of automobile production, outside parts makers were motor manufacturers made no secret of the fact that steadily enabled to fabricate their products more they employed in their cars various units of assembly cheaply. The development of such external economies fabricated by favorably known outside parts makers. raises an interesting, albeit complex, question of manu- The extent to which cars were thus "assembled" varied facturing policy, the more detailed discussion of ,which with the different companies. In general, the producers will be reserved for another volume: To what extent is of high-priced cars made more of their parts than did it desirable for the manufacturer to buy his parts from those of lower-priced cars. Between about 1908 and outside parts makers, or, conversely, to what extent 1914, however, the cars of nearly all manufacturers is the continued integration of processes within his were in large measure assembled, a few of even the lead- enterprise desirable? ing makes being almost entirely so. 52 THE AUTOMOBILE INDUSTRY EVOLUTION OF MASS PRODUCTION 53 Since about 1914-1915, however, most of the larger parts within the enterprise seems to have been a desire companies have come to manufacture their own motors, for certainty of supply so as to promote the continuity axles, transmissions, and a number of other parts as of plant operation, rather than primarily to lower pro- well. Some now make even their own bodies. What duction costs. But by 1918-192o, whatever the rea- has enabled this development to take place is, of course, sons, the day of the purely "assembled car" had passed. the constant increase in the scale of production. The All the large makers now manufacture their own en- annual number of cars made by the average (median) gines, this being regarded as the principal criterion in producer over the period from 1903 to 1916 reflects ascertaining whether or not a car is "assembled." A this great increase. In 1903, this figure was 200 number of parts they still continue to buy, however; cars, in 1909, about 500, in 1916, approximately 2,000. and the question of internal versus external economies By 1926, however, the figure had become 7,600. The as yet remains unsettled in a number of directions. arithmetic mean figures of annual production per plant, which reflect the development less accurately but em- This chapter has omitted the discussion of many phasize the presence of the larger companies, are as matters—events so large and problems so complex that follows: in 1916, about 18,000 cars; in 1922, over 25,- their adequate treatment requires a book in itself. In 000 cars; in 1926, 8o,000 cars. By 1924, 8 makers particular, the problems of labor and the influence of produced over Ioo,000 cars each. The average (arith- automobile manufacturing development upon the in- metic mean) number of workers per factory was in that ternal organization of other industries have not even year 4,700. Excluding the Ford plants, this average been touched upon. Their discussion, like that of other figure is estimated at 3,100. These few figures are things, however, may here be dismissed as not strictly here cited merely to indicate the average scale of manu- a prerequisite to the understanding of the market and facturing operation. Further figures relating to the commercial developments which are treated in the scale of production are given in another chapter in con- chapters which follow. One word, however, on the nection with the subjects of industrial concentration general history of automobile manufacturing which has and combination. just been sketched ought to be added: Will the future But in spite of the great scale upon which production see as many rapid and radical changes in methods of now takes place, the question whether a continually automobile production as have occurred already? greater integration of processes is advisable upon the Doubtless it will not; it may well be that the motor sole ground of cheapness of manufacture is a debatable industry, which is now expanding less rapidly than in one. The most frequent stimulus to make additional the past, will witness no very great further changes in 54 THE AUTOMOBILE INDUSTRY productive technique. Yet prediction in such matters is always dangerous. For example, within the last two years it has been suggested that Diesel (oil burning) III engines, already used abroad in motor trucks, may sup- plant gasoline motors in all vehicles for road transpor- tation; and that then other alterations in design and GROWTH OF THE MARKET, 1903-1916 construction may be introduced. It is not inconceiv- able that if such events should take place, the technique t. The Basis of Consumer Demand of production may again become markedly and rap- THE manufacture of automobiles has attained the idly altered. But even should no such further great unprecedented character and proportions sketched in development take place, the history of the automobile the preceding chapter only because a surprisingly great industry furnishes an instructive example to those who demand developed for the product. It is the purpose wondered, some twenty or thirty years ago, whether the of the present chapter to consider the nature of the day of all revolutionary improvements in productive demand for the motor car as a commodity purchased processes was over. The cumulative character of by the individual consumer, and to trace the steady economic development which any examination of the growth of that demand throughout the period from automobile industry discloses, the ramifications and in- 1903 to 1916.57 terrelations of industrial technique which everywhere Fundamentally, the passenger automobile offers to appear in such changes as have here merely been the prospective purchaser a transportation service. But sketched, all support the thesis that the Industrial Rev- it offers much more than that, and the fact that it does olution, so far from being merely a thing of the past, offer more is important in explaining the great develop- may yet look forward to continuous expansion. ment of its market. Without any attempt to enumerate all the various actuating desires which may on occasion induce the purchase of a motor car, the purposes for which automobiles are bought may be classified under four main heads. These are: Transportation Service, Sport, Personal Possession, and Social Prestige. The four are in no sense separate; they are all supplied in the one object purchased. But overlap though they may, it is believed that in varying degrees they moti-

55 56 THE AUTOMOBILE INDUSTRY GROWTH OF THE MARKET, 1903-1916 57 vate the acquisition of every passenger automobile pur- ilarly, the Waltham Manufacturing Company in 1904 chased, be it a four hundred dollar car or a four thous- declared of the Orient Surrey that it would "climb all and dollar one. grades and carry four people everywhere they wish to Take first the primary want which the automobile go"; while the makers of the famous curved-dash Olds- gratifies, the desire for transportation. Since the car mobiles in the same year stated: he buys must supply such service, the purchaser is in- You see them wherever you go; terested in its performing power. He wants carrying They go wherever you see them. capacity, speed, power to "negotiate" hills or a stretch The innumerable races and contests of the period prior of poor road. Above all, he desires reliability, the to 191o, which will be discussed later," also aimed at capacity of sustained operation. In its early days, the a similar end. Makers attempted to convince the pub- motor car was an uncertain mechanism, and these sev- lic that their particular cars possessed superior quali- eral desired factors of performance were somewhat dis- ties of performance in rapid and powerful transporta- trusted. Thus, for example, the advertisement in 1905, tion service. Even today, when no one doubts the of the Pope Manufacturing Company, makers of the ability of any car to make any reasonable grade, or to Pope-Hartford, a $3,200, 23-30 horsepower car, as- carry as many persons as can be crowded into it, mak- serted, "Each car tested to a mile a minute flat."" Sim- ers continue to devote much advertising to descrip- tions of the performance of their cars. Smoothness, silence, acceleration—the ability to "throttle down" to low speed and then pick up in a flash—all are stressed. The element of sport, the factor of play or—there is no better word—of fun, is a further utility offered by the motor car. This is one of the things that have accounted in large part for the ready adoption of the motor by persons who could early afford its purchase, and it still accounts for a large part of the mileage which many cars run each season. For the automobile as a transportation mechanism is more than merely a means of carrying its passengers from one place to another. It is, to use a phrase now almost taboo in the Figure so: THE CELEBRATED CURVED-DASH OLDSMOBILE. The most popular car on the road in 1902-1903. automobile fraternity, a "pleasure car" as well. Orig- 58 THE AUTOMOBILE INDUSTRY GROWTH OF THE MARKET, 1903-1916 59 inally it was called just that, but within more recent the piano, the automobile was, until recently, nearly years, yielding to certain criticisms, very likely first always sold for cash, not upon installment. The pur- connected with the wartime restrictions of so-called chase of an automobile, therefore, has always been a "non-essential" processes and products in industry, the family event of considerable magnitude. Though one appellation has been dropped and the term "passenger name only appears upon the order, the family group car" substituted. But this is in one sense unfortunate, is the unit to which, typically, the car is sold. In most for the modern automobile affords not only "quick, im- families, each member is consulted; each member, mediate, individual transportation;" it gives users also, from the twelve-year-old boy who has carefully read to use the striking phrase employed by the Packard the catalogues dealing with engine specifications, to his Company in introducing its twelve-cylinder car in 1915, mother who examines as carefully the vanity acces- "the thrill of eager power under perfect control." sories, the upholstering, and the texture of the carpet Always, this sensation of a surge of power has been in the tonneau, has some vote in the selection. The sufficient to excite enthusiasm in those who have ex- automobile is thus definitely a specialty and not a perienced it. Though the novelty of the sensation has staple good. Conscious thought and interested atten- for some worn off, there still remains for many drivers, tion are given to its purchase. and for many passengers as well, a constant source of A recent writer on marketing classifies all consumers satisfaction in the ride itself. From the very introduc- goods into three groups: convenience goods, shopping tion of those early single-cylinder machines of Duryea, goods, specialty goods. He defines specialty goods as Haynes, Olds, King, Ford, and Winton to the present "those which have some attraction for the consumer, age of swiftly running fours, sixes, and eights, the purr other than price, which induce him to put forth special of a motor or the exhilaration that comes from a burst effort to visit the store in which they are sold and to of speed continues to awaken a pleasurable response. make the purchase without shopping"; and he quite Beyond its character as a transportation mechanism properly lists the automobile as an example of a spe- and as a means of pleasurable sport, however, the auto- cialty good." But it is also in large measure a shopping mobile is also a satisfactory personal possession. Like good, since specifications are compared and perform- a handsome piece of furniture, a picture, or an artistic ance qualities are checked. Automobile shopping is piece of jewelry, it not only is used but it reaches a undertaken even more systematically than any other deep-seated sense of ownership. Its purchase repre- kind of retail shopping. It differs from shopping for sents a larger unit expenditure than does almost any other commodities in that not only prices are compared, other article of consumption. But, unlike the house or but a host of other attributes as well. The automobile 6o THE AUTOMOBILE INDUSTRY GROWTH OF THE MARKET, 1903-1916 6r buyer is purchasing a durable consumption good, one mechanical design of their cars. From the inception that is relatively costly to buy and entails expense to of the industry, "new models" have constituted a maintain, and one that satisfies a complex of wants. It unique and significant aspect of the business. In our is this latter characteristic which presents to both pro- discussion of commercial policies, this will be mentioned ducer and retail dealer some of their greatest problems again; we have here only to point out the importance in marketing and advertising policy. of these several variations from the marketing stand- Midway between the fact that the motor car is some- point. thing to own as well as to use, to tinker with and even And important indeed they are. To say that many in some cases to feel affection for, and the fact that it a car is sold upon its "looks" alone would be an over- satisfies the desire for social prestige, is blended as a statement, for the motives which actuate selection are marketing consideration the factor of attractiveness of always more complex than this. Yet often for short appearance. Here, as on the mechanical side, no two periods, when new makes of cars have been offered to makes of car are alike. There are all kinds of touring the public and little save rumor was known concerning body designs, all kinds of roadsters, coupes, sedans, and their mechanical merits, beauty of line or mere dash limousines; and of late years even the "coach" has of appearance has sold the product in quantities. And made its appearance—a four- or five-passenger closed even for long periods, if mechanical excellence and per- car with only a single door on either side. Take, how- formance qualities are well established in addition, ap- ever, any one of these body styles, and among the dif- pearance may still be the decisive factor. ferent makes of cars you find the utmost variation. Last, but by no means least significant of the utilities Some have rounded radiators, some have squared; which the automobile provides is the fact that its pos- some have beveled, straight-line bodies, some have session enhances the social prestige of its possessor. It curved; some have hoods relatively high in proportion not only is seen, like the furniture in the house, and to their lengths, others, relatively low; some have one unlike the furnace, but it is seen by others than the type of windshield, top, or door, others have different owner. The possession of any automobile denotes that types. And besides the multiplicity of varieties in a certain, albeit no longer necessarily a very advanced, form, there is variety in color. Decidedly, the auto- stage of income has been reached; possession of some mobile, though a piece of machinery, is a "style prod- makes of automobiles indicates that greater heights uct." From year to year most manufacturers, and have been attained; while ownership of certain other at least every few years all manufacturers, make either makes of cars suggests the pinnacle of financial achieve- major or minor changes in both the appearance and ment. As a personal possession which can be readily, 62 THE AUTOMOBILE INDUSTRY GROWTH OF THE MARKET, 1903-1916 63 repeatedly, and unmistakably displayed to all, the auto- $1,000 cars, but with $800, $850, and $900 cars and mobile has no equal. with $1,o5o, $1,1(00, $1,150, and perhaps even with This is one of the reasons why the replacement de- $1,200 and $1,300 cars. Similarly, the $3,000 car com- mand for cars has been and will continue to be so large. petes with $2,500 cars and perhaps with $3,700 or "Once an owner, always an owner" is primarily, to be $3,800 cars. Just where to demarcate these limits is sure, a result of the transportation utility which the car an interesting problem in consumer demand and price supplies, and the pleasure and sport obtained from driv- policies. In fact, the entire question of price determi- ing. But all automobile manufacturers and dealers nation in automobile manufacture is one which not only recognize as well the existence of this appeal to social raises some most interesting questions connected with prestige. There is no doubt as to its presence, there the industry, but goes to the heart of the assumptions can be question only as to its effect. Has it promoted underlying the economic doctrines of market and nor- extravagance in living, and thus caused "social waste," mal value. Whether in this matter (to use the language or has it acted as a spur, stimulating harder work and of economic theory) the Marshallian view or the Aus- greater social production? These are debatable topics; trian position primarily be taken," the assumption is they will be spoken of later. always either that homogeneous units of product are offered by competing sellers, or else that one producer 2. Consumer Demand and Price Determination has virtually a monopoly in the industry. Yet in the It is social stratification, however, which both is vast majority of actual instances in industry and com- catered to by various non-competing groups of cars and merce today, neither condition is present; there is severe which in turn gives rise to them. From the beginning competition between somewhat similar products, sup- of the industry there have always been some cars selling plied by a number of competing sellers. No one of their below $800, some selling at $1,000, some at around products may properly be regarded, as is the alternative $1,5oo, $2,000, $3,000, or $5,000 and over, and at to the purchase of a really monopolized commodity, prices intermediate between those figures. Within each merely as a substitute for the other; it is the same gen- group there has developed competition between differ- eral kind of product, but made or finished differently in ent makes; between the several groups there exists one or a number of respects. The alternative which the competition mainly at the fringes, so to speak. How consumer has is not what kind of article he may buy to large an area constitutes these fringes is, however, im- satisfy his wants, but which brand or make of article he portant. The $1,000 car does not compete with the purchases. $5,000 car; it does compete, not merely with other Such a product, par excellence, is the automobile.

*A-1.`••• GROWTH OF THE MARKET, 1903-1916 65 64 THE AUTOMOBILE INDUSTRY several combinations of elements make to the consumer Any car one may select supplies a clear illustration of probably determines his choice of a car selling within an article midway between the orthodox assumption of the limits of any price group, somewhat irrespective of perfect competition on the one hand, quasi-monopoly the precise price at which it sells. upon the other. Yet there is no doubt that it is sold Whatever the exact mechanism of the price fixing competitively, and that "competitive influences" have process, there can be no doubt that every producer of a great deal to do with establishing prices. motor cars has this fraction of monopoly power: within Not only is there competition between the cars rather broad limits he can set his price where he pleases within each group, but also, as has just been suggested, and still sell cars. Very probably, however, the severest between the several groups of cars themselves. One competition in the industry occurs not among the pro- of the most generally noted occurrences in the social ducers habitually selling within any given or estab- life of any neighborhood is that car owners "graduate" lished price class," but takes place when one producer from one class to another; the automotive social ladder lowers his price so drastically as to enter another price is an important one. Yet in many cases this upward group. If then his product presents a combination of movement is attended by considerable doubt on the elements such as clearly surpasses that offered by any purchaser's part and is carried through only after much producer in the group he has just entered, the others hesitancy and calculation. must all lower their prices or else suffer a serious falling Prices here, therefore, are not determined "competi- off in sales. The events of the last two and a half years, tively" in the usual sense, because the products offered when several producers have invaded the $500-$75o for sale are not completely standardized. The auto- field in this manner, seemingly corroborate the hypoth- motive manufacturer actually can "put" a price upon esis here suggested. It accounts for the recent decline his product, and get that price, so long as it is not inor- in Ford sales and the expansion of Chevrolet, , dinately above the average price of other cars of equal and other makers' outputs which are discussed in later weight, size, and power (that is, does not show a differ- pages.' 8 ential of, say, more than $59, Sic*, or $2oo). But although the price thus set may not be "inordinately" 3. General Growth in Market Demand above any other producer's price, it may vary substan- The growth of the market for cars from 1903 to 1916 tially from it. And the number of cars sold, whatever is depicted in Chart 4 on the next page. From a price is set, depends largely upon the particular com- production of about II,000 cars in 1903 to one of 1,- bination of the several elements of construction, design, 500,000 in 1916 is the accomplishment recorded in these and appearance that is offered. The appeal which these 66 THE AUTOMOBILE INDUSTRY GROWTH OF THE MARKET, 1903-1916 67 1,800 fourteen years. The total output for the entire period is approximately 4,400,000 cars. The figures in this and 1,000 in a number of the charts which follow are plotted upon 000 800 a logarithmic scale, on which equal vertical distances 700 represent equal percentage changes in the data as plot- 600 ted from year to year. Changes in the slope of the 500 curve, from year to year, therefore indicate accurately

400 the comparative rates of production growth during the period in question. 300 A glance at this chart serves to show the remarkable steadiness with which this growth has taken place. To be sure, there is a variation in the rate of growth for 200 any one year as compared with another, but this varia- (.; tion is explicable, in the main, on cyclical grounds. Take any three or four consecutive years together, and 0 you find almost precisely the same rate of increase as O 100 00 for any other such set of years. Thus observed, the 60 slope of the line changes hardly at all. It indicates a 70 steady expansion, with each year's output averaging64 60 about a 455 increase over that of the preceding year. Before inquiring into the reasons for this steadiness 0 in the rate of growth in general, we may examine the detail of the curve more closely and note such diver- gences as do exist. One is at once struck with the great rates of increase from 1903 to 1904, from 1908 0 to 1909, from 1911 to 1912, and from 1915 to 1916. One notes, conversely, the relatively slight rates of growth from 1904 to 1905 and from 1910 to 1911. The 00% increase in production from 1903 to 1904 is somewhat surprising in view of the fact that 1904 10 1903 '04 '05 '06 '07 '08 '00 '10 'II '12 '13 '14 15 '16 Chart 4: Pa,-,,cnger automobile production in the United States, 1903-1916. 68 THE AUTOMOBILE INDUSTRY GROWTH OF THE MARKET, 1903-1916 69 was a year of general depression. It was not so bad So also with the relatively large increase—a 79% a year, to be sure, as some others have been, but it gain—from 1911 to 1912. The cyclical factor is here, nevertheless was characterized by a level of trade dis- however, much less important; the year 1911 was not tinctly low. Automobile manufacture, however, was a one of real depression, but only of recession. General new and growing industry. The demand for its product business activity receded at worst about 4% from the came in these early years chiefly from the well-to-do, normal line." But combined with the difficulties in and the consumer demand for goods exerted by this which the General Motors Corporation (then called class of persons falls off only slightly during depres- General Motors Company) had found itself in 1910, sions. On the production side, the increased capacity this slackening of general business in 1911 served to afforded by the great expansion of the Olds Motor put an effectual damper upon the expanding automo- Works," together with the fact that the success of this bile industry. The years 1908, 1909, and 1910—in par- company in 1903 served to stimulate production at the ticular, 1909—had all Shown goodly increases in the hands of the other manufacturers, accounts in large rate of expansion (47%, oi %, 43% over each pre- measure for the relatively large output of the industry ceding year, respectively). What more likely, then, in 1904. that a temporary falling off ensue, just as took place The next great rate of increase, as shown by the in 1905 after the striking increase of production in year-to-year progress of the curve in Chart 4, came 1903? So far as can be made out, this is just what between 1908 and 1909. Production in 1909 increased happened. The successful years of 1908, 1909, and o % over that in the year preceding. This undoubt- in part of 1910, led manufacturers to wax optimistic, edly is due chiefly to the fact that there was a panic in to undertake commitments which could not be financed 1907. The year which followed (the panic occurred in out of sales later in 191o; the result was the necessity the fall) was marked by a level of trade ranging from of curtailing operations drastically in 1911. Several au- 7% to 19%. below normal." Production in the auto- tomotive factories were shut down for one or more mobile industry showed a substantial increase in this quarters of this year. In the terminology of the busi- year (1908); but the increase registered would un- ness cycle, the automobile industry underwent a crisis doubtedly have been a greater one had not a general in its manufacturing history. depression of business occurred. The year 1909, with Since it is not our purpose here to treat at any length its doubling of the production of the preceding year, of the question of extremely short-time oscillations of represents a normal secular increase combined with full production, we shall not pursue this matter further. recovery from the cyclical restraint of 1908. But the economic investigator concerned with the re-

''''7"'-1`4911=a2111111 7o THE AUTOMOBILE INDUSTRY GROWTH OF THE MARKET, 1903-1916 77 lation of the cycle of an individual industry to the busi- of war in Europe occasioned a sharp drop in business ness cycle at large would have in the year 1911 an activity in this country, the extreme low point being interesting item for analysis. Detailed study of that almost 18% below normal." Recovery commenced year would doubtless throw important light upon the about the beginning of 1915, but trade did not become manner in which a new and rapidly developing industry normal again until the end of that year." meets its short-time financial and other vicissitudes." Though in no year prior to 1917" did the production The market for a new product, such as the motor car, of automobiles ever show an absolute decrease as com- can grow only as more consumers come to desire the pared with the production of the preceding year, we article, or as more consumers receive such incomes as see, nevertheless, that changes in the rates of increase enable its purchase. (We may waive here the possi- during the years 1903-1917 corresponded roughly with bility of the same consumer's buying several units of changes in general business conditions. Except for the the product; so-called dual ownership of automobiles year 1904, each marked recession in general business was, until recently, restricted to those at the top of was accompanied by a relative decline in the ex- the income scale.) But arrangements for production pansion of automobile production. are made by manufacturers in anticipation, and on es- timate, of the market. Production plans in 1911 over- 4. Character of Market Demand rated what the growth of that market was to be. If We may now turn our attention to the factors which the average rate of increase for production and sales" have made for that great and surprisingly steady rate through the years 1908 and 1909 could have been main- of growth in general from 1903 to 1916. If we plot tained, the line of secular trend for the output of the passenger car production, not by single years but by industry up to 1916 would show a decidedly sharper the accumulations of three-year periods, we get a line slope. Just what this slant would have been can be such as is shown in Chart 5. Expansion has taken observed by again examining Chart 4. place, not literally by leaps and bounds, but by a pro- Finally, just as the great increase of production in digious climb, a climb steadily maintained throughout the year 1912 represents a recovery from the extreme the entire period. In the three years 1901 to 1904, low level of 1911, so the 51% and 86% increases of there were made 49,00o cars; in 1905 to 1908, 166,000; 1915 and 1916, respectively, over the years immedi- in 1909 to 1912, 864,000; in 1913 to 1916, approxi- ately preceding, represent a recovery from the general mately 3,300,000. We may examine first the causes of business depression of 1914. We need not analyze the magnitude of this growth, then the causes of its conditions in detail during these years. The outbreak steady character.

^-rwreKiMrTaCRETi -,674cw _w5Augajonivactr- 72 THE AUTOMOBILE INDUSTRY GROWTH OF THE MARKET, 1903-1916 73 At the outset there was skepticism. The automobile sons have for motor cars. The demand which they can was a horseless carriage; it was not only new but effectively exercise must rest on something more; to dangerous. But once the opposition upon grounds such explain how each year an increasingly great group of as this died down, the desire of most Americans for consumers came to buy them necessitates some exami- motor cars became a fact. Why should people want nation of that group's willingness and ability to pay the automobiles? To many, the question today seems one purchase price. Since during the entire period which too idle to answer. The several satisfactions which we are here considering (1903 to 1916) cars were the automobile yields the consumer have already been bought by consumers only for cash, and since the aver- analyzed: transportation service, recreation, social age (arithmetic mean) price of the 4,400,000 cars sold prestige. Once the utility of the motor car in these through this whole period was about $825, the readi- 4000 respects was demonstrated, the ness and ability of consumers to purchase seem indeed 3000 desire for ownership on the remarkable. 2000 part of millions of persons fol- We can best examine these several matters by ana- lowed. The American, in par- lyzing the growth of the market in terms of price classes 1.000 ticular, desired the motor be- of cars sold. While during the period prior to 1917 cause it satisfied his love of ac- (-1 500 the rate of growth for production in toto has been ap- tivity, of rapid movement proximately constant, sales in particular price classes 300 from place to place, of inde- of product have not grown in the same manner. There 8 700 pendence to go and come as he has, in short, been a shifting of sales (and of produc- pleased. Much emphasis is tion") as between the several qualities and sizes of 100 often placed upon national product. The course of this development is seen in character in explaining the Chart 6, shown below on page 75. This chart, pre- 30 .3,0 economic development of par- .901•04 1905-00 000- 12 pared from a practically complete enumeration of the countries; often this Chart 5: Passenger automobile production figures for all companies which engaged in production in the United States. may be overdone. But in the By three-year periods, 0903-06. manufacture," shows, for each year from 1903 to 1916, case of the automobile, there the sales of American companies, classified according to can be little doubt that we as a people were pecu- nine different price groups. Before examining the chart, liarly fit, by habit and tradition, for its widespread however, a few remarks must be made concerning the adoption. compilation which underlies it.' All this, however, explains only the desire which per- The division into price classes is arbitrary, as any

_.AjhraMMMIZIV.` 74 THE AUTOMOBILE INDUSTRY GROWTH OF THE MARKET, 1903-1916 75 such division must be. It attempts, however, to em- and the $4,000 car—had indeed become a vastly better brace what might be termed "non-competing groups of vehicle by 1916, its price had not risen in accordance cars." Thus the price ranges between the several with the general level of commodity prices because of division points are not uniform, but increase as price increasing output, improved manufacturing methods, ascends. Five hundred dollars difference in the price and lower costs of production. of a car of one make as compared with one of another These preliminaries disposed of, examine now Chart make may be considered as meaning no more to a buyer 100% of a car in the $1,775-$2,275 class than does perhaps $200 to a buyer of a car in the $675-$875 class. Sim- ilarly, a thousand dollars more or less spent by the buyer of a $5,000 car may mean no more than does 80 Sioo to the buyer of a $675 car. One further point is to be noted before we proceed 70 to an examination of the results of this compilation. No allowance has been made for changes in the pur- chasing power of money over the period 1903-1916. 60 The reason that this has not been done is that relative to one another a thousand dollar car and a four thous- 50 and dollar car in 1916 represented about the same types of vehicle, broadly speaking, as in 1903, 1904, ao 1905, and the other intervening years. In any price class, the car of 1916 was a far better automobile than 30 the car of 1910, just as the car of 1910 had been a better machine than that of 1903. But in comparative size, design, and workmanship, a six-cylinder, 6o-horse- 20 power, i38-inch wheel base car of 1916 stood to a four- cylinder, 3o-horsepower, 116-inch wheel base car of 10 the same year about as a heavy four-cylinder car of 0 1904 or 1905 stood to a light two-cylinder vehicle of 1903 '04 'OS '06 '07 '08 '00 10 'II '12 '13 '14 15 '16 the same vintage. And though each—the $1000 car Chart 6: Factory sales of passenger cars by price-classes, 5903-56.

WWI ,.11■0 ,. 1,5-e=,-kAilliiial=11111.11ror - ' 76 THE AUTOMOBILE INDUSTRY GROWTH OF THE MARKET, 1903-1916 77 6.76 In 1903, cars selling at $1,375, or under, constituted 45%. But by 1916, they came to less than 2%. about two-thirds of the total production.77 In the years Conversely, the lowest-priced group of cars, that un- immediately following, this proportion of low-priced der $675, for a long time played a proportionately cars (cars below $1,375) steadily decreased, until in small part in the expansion of the industry, rising above 1907 the situation was reversed, only about a third of 7.5% in one year only, prior to 1911. Yet in every the cars in that year selling at or below $1,375. Then, year from then on, sales in this class amounted to more with our attention still upon this large grouping of cars than 25% of the total, until in 1916 they constituted above and below $1,375, in 1908 came a swing back; 51.i %. Note, too, how cars selling around $1,000 and in all the years following the higher-priced cars ($875 to $1,375) formed for years a far larger group became proportionately less important, and the lower- than did those selling either around $800 or around priced ones relatively more so, until in 1916 the latter $600; yet in 1916 these $1,000 cars came to hardly constituted about 90% of the total. One might suspect more than did the $800 cars, and only to about one- that this latter movement is due merely to Ford, but third as much as the $600 cars. One now notes the this is by no means the case. If one takes the Ford influence of the Ford company; this latter displace- figures out, there still remain, in 1912, 1913, 1914, ment is due chiefly to its policy of having gradually 1915, and 1916, the following percentages of the total lowered prices. to the credit of the cars under $1,375: 43%, 38%, Additional details may be obtained through such fur- 64%, 57%, 84%. ther study of the chart as the reader may wish to make. In like manner one may trace on this chart the move- A similar diagram for the period 1917-1926 will be ment of any class or combination of classes indicated. found in the following chapter. The tables of per- Note, for example, the relatively insignificant part that centages underlying both charts are given in Appen- has been played throughout the entire period by the dix B, pages 335-337 and page 345. $5,000 cars—those selling at $4,775 or above. Never has its proportion of sales been more than a small per- 5. The Underlying Causes of Demand Changes centage of the total. Such is not, however, true of the The explanation of these several shifts in market de- $4,000 car (the class selling between $3,775 and $4,- mand lies in several directions. Many of the cars made 775), nor of the $3,000 car (selling between $2,775 up to about 1904 were single- and two-cylinder ve- and $3,775), nor of the $2,500 car ($2,275 to $2,775). hicles. They were relatively light affairs, the chassis At one time, these three groups ($2,275 to $4,775) in some ways suggesting buggy, carriage, and bicycle comprised nearly half of the entire total—in 1906, practice rather than automotive design of present-day GROWTH OF THE MARKET, 1903-1916 79 character. Then came the steadily wider adoption of the four-c: Under motor. This involved making heavier and more powerful cars, which cost more to manufac- ture. The high-speed motor, of small bore but great power, had not yet made its appearance, and added size and weight were called upon to furnish the desired performance. As will be pointed out in a moment, how- ever, consumption still came chiefly from the well-to-do classes in the community; a market for the higher- priced, more powerful cars, therefore, existed. This market was served, and served upon a scale large both absolutely and proportionately, from about 1904 to about 1910. The demand for powerful, heavy cars ran to ex- tremes, and some monstrosities of shapes and sizes ap- peared. An interview with the sales manager of the Packard Company by a representative of a trade paper, in 1905, is reported as follows: Of the tendencies of the times, Mr. Waldon said it was unmis- takably for higher-powered cars, incidentally letting fall the infor- mation that his company probably would be forced next year to build some 6o- and 9o-horsepower machines in response to it, but predicting at the same time a reaction to normal power and weights when the user got tired of colossal tire bills and the natural expense incidental to the operating of giant cars. The "disease," as Mr. Waldon termed it, had in his opinion, about eighteen months yet to run." It would seem that this prediction was not far wrong. Just about two years later, the trend in question began

Figure II: FOUR HEAVY CARS OF 1906-1908. to reverse itself, although it took about six years all told before there was seen something like a definite return

78 8o THE AUTOMOBILE INDUSTRY GROWTH OF THE MARKET, 1903-1916 8 to the proportion which obtained between cars selling came firmly to be established as the standard type. above and below $1,375 in 1903-1904. An additional Lighter ones were then made by many producers. The cause which may have contributed to this relative development of new designs and better methods of pro- plethora of higher-priced cars during the period 1905- duction enabled good four-cylinder vehicles to be 1910 was the depression of general business which, we turned out at lower costs, and thus, just as the demand have already noted, was felt in certain of these years. for expensive cars became (as we shall soon see) tem- The year 1904 was a bad one, a part of 1907 was bad, porarily saturated," there came a great growth in the 1908 was extremely bad. These years of depression market for low-priced cars. did not cause any appreciable curtailment of automo- In part, this growth doubtless resulted from the bile purchases on the part of the middle and lower general increase in material well-being which took classes in the income scale, for such persons had not place; the income of the country as a whole did increase bought cars previously. But the years of depressed substantially. But an examination of the rate of this business may have checked any tendency of this charac- growth in the country's income throws only slight light ter which might otherwise have developed. upon the problem; it was not so marked an increase as It was partly to counteract the then prevalent, and to indicate that any widespread purchase of cars, due all too frequently well-founded, impression that most to this cause alone, became much more possible on the automobiles were luxuries which could properly be part of the middle and lower classes of income receivers owned only by the very wealthy, that the 1907 Buick after the years 1910-191 180 than before. Nevertheless, catalogue stated of the "Model D", "It has not been the great growth in the demand for cars of all types our purpose to build a high-powered car . . . . rather in this country is often explained solely upon grounds . . . . to build a car that combines economy in opera- of our large and constantly increasing national income. tion with a minimum expenditure for maintenance." To suggest that our large per capita income, as com- The model thus described was a four-cylinder car of pared with that of other countries," is in part respon- 102-inch wheel base, weight 2,25o pounds, of 24 horse- sible for our adoption of the motor is one thing; but power. But even this small car, paraded as an eco- to say that the rate at which it has increased explains nomical machine to purchase and run, sold for $2,000, in any large measure the growth of the automobile minus headlights, top, and headlight gas tank! These market is quite another. This can be seen by a glance three appurtenances added $210 to the price, which at Chart 7, which indicates the comparative levels of was, of course, quoted f.o.b. factory. automobile production, the production of manufactures After 1909-1910, however, the four-cylinder car in general, and national income (for such years as data

GROWTH OF THE MARKET, 1903-1916 83 82 THE AUTOMOBILE INDUSTRY creased by about 475%. Automobiles were bought in- are obtainable), with allowance for price changes, dur- stead of other things; not always things which actually ing the period 1903-1916. The arithmetic average of were being bought, but probably, in many cases, things figures for the years 1903-1913 is taken as the base which would have been bought in somewhat larger for all three curves. Curve A is automobiles, Curve B quantities as the country's aggregate income rose. is manufactures in general, Curve C is national income. For a community to be able to consume in one year, Little need be said in the way of analysis of this say, twice as many automobiles as in some earlier year, chart; it speaks for itself. The vastly more rapid rate without actually giving up the consumption of any of increase in automobile production (once the year other articles, obviously does not require that its in- 1908 was passed) over the rates of increase in both come be doubled. But in the absence of such a dou- manufactures in general and national income in the bling of total income it does necessitate that the con- aggregate suggests that, up to 1916 at least, the growth sumption of certain other things fall short of being of the market for automobiles was not caused solely by doubled. Here, however, automobile consumption in- 111 I any general increase in wealth, 500 -4 I 11• creased by about twenty times as much as did national - - ManufacturesAutonsoblles In general IPA but in large measure must C- National Income income. This, to repeat, does not mean that the auto- 300 have diverted income and re- mobile did not contribute vastly towards that very i sources from the purchase and production of certain other increase of national income which in some measure, of course, made its purchase possible. It did. But it was 111114 commodities. This implies 1100 bought also by many persons who gave up the pur- neither that automobile con- chase of certain quantities of other goods because they 30 sumption has been "waste- 40 felt that the automobile had more to offer them than 1000 10 11 12 13 14 15 '16 ful," nor that it has not con- did the total of these other articles. Chart 7: Indexes of automobile tributed to increase production production, physical volume of on the part of the nation at It is impossible to say just what other things were manufactures in general (after given up either wholly or in part, or of which things E. E. Day), and national income, large. But it is apparent that 1909-1916 (after National Bureau purchases were postponed; probably, in part, pianos, of Economic Research). (Arith- the rates of increase in auto- metic average, 19o9-13=Too). mobile production and in certain kinds of clothing, certain types of furniture; goods in general did not keep pace during the period doubtless certain services. But no quantity of statistics we are here considering. The country's annual income which one could compile for clothing or for furniture in 1916 as compared with 1912 had increased by about would indicate anything at all conclusive, unless figures 25%. But the annual production of automobiles in- were available for each and every one of the other 84 THE AUTOMOBILE INDUSTRY GROWTH OF THE MARKET, 1903-1916 85 items which enter into consumers' budgets. We can ing chapter in the history of the American standard of be certain that not 475% more of everything was an- living if it could be written. nually consumed between 1912-1916. We know, in The chief causes of the increased purchase of auto- terms of the only universal measuring unit we have, mobiles by the middle and lower classes are thus not the dollar (corrected, of course, for changes in pur- to be found in any great increase of general prosperity. chasing power), that the increased consumption of all They are rather to be found in the character of the things could not have averaged more than a 25% ad- product itself. During the earlier years of its history, vance. But comparison of changes in the rate of con- the automobile was a very expensive possession to sumption in any two, three, or four commodities would maintain. The now well-worn statement to the effect not indicate any causal relationship as existing between that it is not the original cost but the upkeep which them; for when the proportion of a person's income counts was certainly most pertinent. Cars are not spent upon one item in his budget is altered, probably entirely trouble-proof today; but the annual expenses that spent not only upon some other single item, or even of operation," chiefly gasoline, oil, tires, insurance, a few items, but upon nearly all other individual items garage rent, and depreciation, constitute a far larger is also altered. total than does the outlay for repairs and parts. Dur- Thus to ascertain with any degree of certitude what ing the period of 1903-1910, however, the expense occa- even the chief shifts in demand were, attendant upon sioned by the rapid breaking and wearing out of parts the diversion of income to the purchase of automobiles, and by the necessity for frequent overhauling and ad- would be difficult in the extreme. Could an investiga- justing of engines, axles, or transmissions, often either tor, however, give sufficient time and attention to the equaled or exceeded the annual cost of operation. question, even a partial answer might afford a remark- Neither the design of parts nor the quality of materials able study in the economics of consumption. A number from which they were made had progressed far enough of bankers and other business men for many years to insure low repair expense to the consumer. The attempted, through public utterances and printed arti- factory warranty, then as now, was only for a ninety- cles, to discourage the infant automobile industry, upon day period. If, after that time, axle shafts crystallized, grounds of danger both to the bond market and to the universal joints snapped, broke, pistons solvency of the consumer. Yet the bond market has cracked, springs gave way, valve stems warped, clutches survived, and the consumer has prospered as well. seized, gears stripped, cylinder walls wore rapidly, or How he has done it—what other things he has had, and flywheels loosened, it was up to the purchaser to pay has not had, to give up—would constitute an interest- the bills. And not only did these and myriad other 86 THE AUTOMOBILE INDUSTRY GROWTH OF THE MARKET, 1903-1916 87 ailments occur frequently and new parts have to be car, was at the mercy of the repair men. I recall one bought, but the cost of these new parts was high, be- occasion, during those days, on which my father's car cause of small-scale production and the virtual absence had just been completely overhauled at a cost of nearly of standardization in design. The treatment of this $3oo. It had not been functioning properly, and this matter here may seem to the reader somewhat exagger- overhauling was all, he was told, that was required to ated. But in 1906, the effective life of many springs put it in condition. The car was in the shop two weeks. was but little over 1,200 to 2,000 miles, and tires were Within a day or two after it came out, the engine began seldom warranted for more than 2,000 to 3,000 miles. again to "miss" and to heat up. In despair, my father When tires wore out, their replacement was indeed ex- called upon a friend who was in the automobile business pensive. A 3o by 3 inch (Ford size) tire as late as 1910 and asked him if he would send a mechanic to look the cost $30, a 4-inch tire for a medium-sized car cost $50, machine over. The man came out, examined the car while a 5-inch tire for a large car sold for over $80.88 carefully, and then gravely announced, "Nothing is Even if parts broke within the ninety-day warranty fundamentally wrong with this car; all it needs is a period, as they often did, the factory's guaranty, how- good overhauling." ever, applied only to replacement of the parts them- Facts of this character were fairly generally known. selves and did not cover the labor cost of installation. They definitely dissuaded purchase on the part of many In some cases, the dealer would absorb this labor cost persons who might have been able to afford the initial when the breakage occurred before expiration of the investment, but who hesitated to commit themselves warranty period, but more often he did not. This item to the possession of an article which might well cause them to live beyond their means. Coupled with this • 40 of labor in making repairs to the vehicle came high in- hesitancy was grave doubt on the pait of those persons who did half decide to buy, as to what particular make . deed, often amounting to several times the value of they ought to purchase. The multiplicity of types, the great variety in design and specifications, which per- 20 the parts replaced. Not only this; it often was inefficient sisted until about 1910, tended literally to bewilder the labor. If not downright dis- prospective purchaser. Nothing was certain, all was in 10 honest, much of it was in- process of experiment. There were offered cars with

engines of one, two, three, four, or even six cylinders. 0 competent; and the average 1909 IVO 100 1012 1913 WWI 1015 10 customer, knowing but little The engine could be of either the four-cycle or two- Chart 8: Retail prices of 30" x cycle type. The cylinders could be parallel or opposed; 31/2" (Ford size) tires, 1909-1916. about the mechanism of the GROWTH OF THE MARKET, 1903-1916 89 they could be set in the chassis either horizontally or vertically; they could be mounted under the body, un- der the hood, or at the rear of the car near the axle. The engine might be either air-cooled or water-cooled. Steering could be by bar, tiller, or wheel. The drive might be by shaft, through bevel gears, or by chain. If by chain, it might be either double or single. The transmission could be either planetary or sliding gear; it might have either 2, 3, or 4 speeds forward. Finally, Two-cylinder Rambler chassis, horizontal opposed type motor located amidships, single-. to exhaust merely the list of major specifications, the ignition might be by either battery or magneto; if bat- teries were employed, they could be either dry or stor- age; if magneto, this might be of either high or low tension. All the diversity—and at first much of this variety in offering appeared within each price class of product offered—confused the layman. If the engineers them-

Left, A one-cylinder vertical air-cooled motor; center, piston and flywheel selves differed, how was he to tell which type, or which assembly and other parts of car with double opposed motor; right, a four- cylinder vertical water-cooled motor. combination of specifications, was the most satisfac- tory? There can be little doubt that questions of this character led in many cases to the postponement of purchases. And in the minds of persons of moderate means they doubtless often strengthened the conviction that ownership of the automobile, in its experimental stages, was not for them. But by 1 91 0-1911, this confusion of type had largely disappeared. After that date, in cars selling below $3,000, the shaft-driven, magneto-equipped, water- Three-cylinder Thomas chassis, motor mounted vertically in front, double-chain drive. cooled car with a four-cylinder vertical engine and three-speed, sliding-gear transmission became the well- Figure 12: VARIOUS MECHANICAL DESIGNS OF 1903-1907.

88

-i$V102;42ffigigrir47.—

GROWTH OF THE MARKET, 1903-1916 90 THE AUTOMOBILE INDUSTRY 91 nigh universal type of vehicle. The Ford, which re- conformed to the general run of vehicles in respect to tained the two-speed planetary transmission, and the the other specifications mentioned. Franklin, which remained air-cooled, were almost the Chart 9 shows the production of cars classified by sole exceptions; but both the Ford and the Franklin cylinders from 1903 to 1916. It will be noted that at T. the start of this period, in 1903, 66% of all the vehicles 100 made were of the single-cylinder type, while fours con- stituted only 14.5% of the total output. Two years later, in 1905, single-cylinder and two-cylinder cars to- gether equaled only half the total production; the four- cylinder cars, plus a few three-cylinder machines, made up the other half. But after then, the fours continued to gain heavily, until by 1912 they made over 90% of 70 all the cars sold. Chart to shows the same develop- ment, the Ford output not counted. Without the Ford production, the percentage of fours in 1912 is slightly smaller, but is still over 85%. After '914, the six- cylinder begins, comparatively speaking, to cut into the 50 market for fours; but the great development of the six belongs to the period to be considered in the next chapter. Between 7907 and 1911-1912, then, the four-cylinder

30 car came into its own. Standard practice in its design made for lower prices of parts and for more efficient A A A repair service. Far better construction also reduced 1 . .11, 1A4,, r r re the necessity for such extensive and frequent repairing Ilnder \\ Ig...AAAA as was before required. After 1910-1911, trips of 700 10 opolmr ,,,, • AA miles and more per day, without the virtual certainty of serious trouble to the average owner, became prac-

%. • • N° 1913 dd1914 AAd 1015 1916 ticable. No longer did manufacturers have to advertise 1903 1904 1905 19013 1907 1900 1900 1910 1011 as did the Cadillac Company in 7903, "When you buy Chart 9: Factory sales of passenger cars by cylinder classes, 1903-1916.

,m7.*Immirlars i-sw;7*P"Z. 92 THE AUTOMOBILE INDUSTRY GROWTH OF THE MARKET, 1903-1916 93 a Cadillac, you buy a round trip." Better roads also tion of the self-starter and other refinements later to made repairs en route less essential and mitigated also be described, "motoring" had become a pleasure instead the dreaded detour. By 1915-1916, with the introduc- of a more or less uncertain form of sport. 100 6. Saturation of the High-Priced Car Market The results of all this development are reflected in 90 Chart 11, which shows the course of absolute sales figures for three broad price classes of cars—in other words, lumps into three main groups the actual figures in the nine classes for which successive percentage vari- IL " ations were given in Chart 6 above." 1 0 Nriree:00eir,!11 A kilAAA. A 1,00CI 1k4 irjr Cylin4 -ders / r p- A- Low Priced Cars i B - Mecrum-Priced Cars 3 C- High Pricedtars 40 50 r. AA A AI A 'OA 30 "Ir r M V • r 2 B./N.

90 iA AAAAAAMAAAA 10 0 Pr r" rrrev r V IJ aper.*'*■*.,.. 40 30 ArA A.A A A . 4 15 3 wS`Nk r rr rrr ra..aimimmr4 20 : . •• 20 „ iA4AAA. A A A : ■"1\ - 4" V'rrr 10

10 4-9 AAAAA 5 ••• 1,1%4 • No* jormgmg -or • r; 4 3

• 2 ...; 0 b. WiA AeA 1005190119051900 1001 1005 luoo 1910 1911 1912 1913 1914 1915 1914 .oe .io 'It 12 13 14 '15 1 Chart 1o: Factory sales of passenger cars by cylinder classes, Ford pro- duction excluded, 1903-1916. Chart II: Production of low, medium, and high-priced cars, 1903-1916. 94 THE AUTOMOBILE INDUSTRY GROWTH OF THE MARKET, 1903-1916 95 The three curves of Chart 11 represent factory sales Cadillac, and E.M.F. cars, in the years 1898, 1903, and of low-priced, medium-priced, and high-priced cars for In the case of Winton, these figures are for the the period 1907. 1903-1916. Curve A is for low-priced cars, twenty cars produced at the factory. Sales or those retailing at or below $1,375; Curve B is for of the other makes are for the first score of cars sold, medium-priced vehicles, or cars selling between $1,376 in each case in the Detroit territory. and $2,775; Curve C represents high-priced cars, those Of the first twenty Steam Mobiles disposed of by selling at or over $2,776. Here, as in previous charts, William E. Metzger in 1898-1899 at his store in De- there is no correction made for changes in the general troit, which was one of the first retail automobile estab- price level from 1903 to 1916." It is worthy of note, lishments in the country, there were sold however, that an expenditure of $2,000 in 1903 or 1905 to a broker was equivalent to the expenditure of successively larger 4 to "capitalists" 4 to physicians r to a printer sums in subsequent years; by 1916, to about $3,000.86 2 to manufacturers r to a plumber That sums of $2,000, $3,000, $5,000, which in 1903- 4 to merchants 3 to "general business men" 1965 meant $3,000, $4,500, or $7,500 in terms of the For the Wintons sold in 1898, the list is much the price level of 1916 (and also, roughly, in terms of the same except that no plumber price level today), were freely spent for motor cars can or printer appears. Sum- mean only that their consumption was mainly indulged marized, it shows thirteen in, up to about 1910-1911, by the relatively wealthy. buyers designated either as But the relative tapering off of Curves B and C, espe- manufacturers or capitalists, cially Curve C, after about 1909, points to the satura- four as engineers or physi- tion (or to use a word now in greater favor, the sta- cians, and three as mer- bilization) of the high-priced car market between 1912 chants.. The first commercial and 1916, and to the slowing down in the rate of in- sale of a Winton car was to crease which took place in the market for medium- Robert Allison, a mechanical priced cars. Of the short straight line drawn to the engineer of Port Carbon, right, through Curve C, we shall speak shortly. , on April r, These inferences as to the character of consumption 1898. This was not, how- prior to 1910-1911 are borne out by some actual facts ever, the first sale of an which have been collected: the lists of the first twenty Figure 13: WILLIAM E. METZGER, first automobile dealer in Detroit; American automobile; the buyers of Steam Mobile, Waverly Electric, Winton, later vice-president, Everett — Metzger —Flanders Company. first sale of any American mo- g6 THE AUTOMOBILE INDUSTRY GROWTH OF THE MARKET, 1903-1916 97 for vehicle was probably that of a made by R. Oldsmobile sold for only $650, while the Winton, which E. Olds and sold by him in 1893 to the Francis Times sold in 1898 for $1,000, was selling in 1903 for $2,500 Company of . The twelfth Winton sale made, and, in common with many other medium-priced and it is interesting to note, was to Colonel J. W. Packard, high-priced makes, was the type which manufacturers an electrical manufacturer of Warren, Ohio, who later and "capitalists" continued to buy. built the car bearing his name. Through the courtesy For neither the sold in 1903 nor for the of Mr. Alexander Winton, the detailed distribution of E.M.F.'s sold in 1907 can the complete details be sup- the twenty first buyers of Wintons, according to occu- plied, but I am told that the situation was essentially pation and locality, here follows: the same as with the cars already enumerated. Sales were to manufacturers, capitalists, merchants, and phy- 2 mechanical engineers, Pennsylvania 2 railroad car manufacturers, Pennsylvania sicians; not to salesmen, small shopkeepers, clerks, me- ✓ oil pipe manufacturer, Pennsylvania chanics, or artisans. The only exception is an occasional ✓ capitalist, Pennsylvania plumber or steam fitter, and such men were in a sense 2 coal operators, Pennsylvania proprietors; they were masters, not journeymen. I coal dealer, Pennsylvania brewer, Pennsylvania I have endeavored, but without avail, to obtain simi- ✓ engineer, New Jersey lar figures for companies whose first cars were marketed • locomotive manufacturer, New Jersey in years later than 1907. But the fact that by 1907, physician, New York when the E.M.F., a $1,250 car, was put on the market, ✓ electric manufacturer, Ohio ✓ piano manufacturer, Missouri the situation had not substantially changed, together ✓ flour miller, Minnesota with the appearance of the three curves of Chart 11, 2 hosiery manufacturers, Ontario leads one to believe that it did not, in fact, become 2 dry goods merchants, Ontario greatly altered until 1910-1911. The first twenty Waverly Electrics sold in Detroit, Returning now to Chart 11, note again the movement also in 1898, were bought by about the same class of of Curve C, representing the sale of high-priced cars, persons that purchased the Steam Mobiles, except that after the year 1911. It runs roughly parallel to the here six cars were sold to "ladies—wives of the above base line of the chart, indicating virtually no rate of class, including two wives of bankers." The Oldsmo- increase whatever. The market for high-priced cars, biles sold in 1903 show about the same distribution, in other words, was completely stabilized for the years except that no "capitalists" nor manufacturers are 1912-1916. Market stabilization may be defined as listed; merchants and physicians predominate. This that point at which the demand for the product is such is probably due to the fact that the little curved-dash 98 THE AUTOMOBILE INDUSTRY GROWTH OF THE MARKET, 1903-1916 99 as to call forth only sufficient units to maintain the 7. Summary: Market Development through 1916 number already in use. More simply, after stabiliza- Stated in general terms, the facts and reasoning prel- tion has set in, the only demand for cars is a replace- sented in this chapter indicate, first, that in the intro- ment demand. Numerically, such a demand is equal duction of a new product, the purchase of which entails annually to the number of cars in use divided by their any considerable expenditure, demand comes initially average length of life in years. from persons in the upper range of the income scale. The average annual demand for automobiles of the Particularly is this the case if the acquisition of the class represented by Curve C, between 1912 and 1916, article involves a substantial subsequent charge for in round numbers according to that curve, was 17,400 maintenance. cars. I have calculated what the normal replacement Secondly, the price at which the bulk of the product demand would have been during these years, on the is sold may or may not, for the time being, bear any basis of the number of cars in service at the end of close correspondence to cost of production; " but these 191187 and each subsequent year through 1915. The prices from year to year vary in a manner which cor- results are as follows: relates with changes in the technique of production as well as with those factors which relate primarily to mar- Theoretical Actual Year Replacement Market . ket conditions. Demand Demand Thirdly, whatever the interplay of these two sets of 1912 21,000 17,500 1913 18,500 20,000 factors, eventually there, is reached a stage during which 18,500 18,000 1914 1915 17,700 15,000 further units of product cannot be sold to consumers 1916 17,500 16,500 located in the upper range of the income scale except in approximately constant quantities per unit of time Curve R of Chart 11, the short straight line running (a replacement demand). When this point is reached, across the ordinates for the years 1912-1916, indicates the extension of the market as a whole may, however, the average theoretical replacement demand during still take place either through an enlargement of the these five years—approximately 18,5oo cars per year country's income or through a downward price move- (arithmetic mean). The actual average market de- ment which permits persons located in the lower ranges mand annually during this period for automobiles of of the income scale, and previously not buyers of the the class here considered, was, as stated, approximately product, to become consumers. This "downward price 17,400 cars (arithmetic mean)." movement" may be one of retail selling price, or may GROWTH OF THE MARKET, 1903-1916 Too THE AUTOMOBILE INDUSTRY zoz largely take the form of lower maintenance expense ducer can sometimes further extend his own market resulting from improvement in the product. In auto- by encroaching on the sales of other producers. But mobiles, both methods of lowering cost to the consumer frequently he attempts not so much to do this as to have operated. By way of qualification, it should, enter the field of the lower-priced product also. This however, be remarked that an aggressive individual pro- has often been the case in the automobile industry, notably within the last five years. Something more will f. 50 be said of this type of competition in later pages. 1903 40 These three stages in the course of automobile prices

30 and sales are illustrated graphically again in Chart 12.

20 The three diagrams of this chart are based on a part of the data which went into the year-to-year price class 10 chart before discussed (Chart 6). The first of these Under Alan •875 *1375 • 1775 *2275 *2775 • 3775 • 4775 three diagrams, that for 1903, indicates how large a • 675 -6875 -01375 -01775 - •2275 -02775 63775 -.4771 &'Over

50 proportion of cars sold at or below $1,375; but a sum 1901 40 of $1,375 then was equivalent to about $2,000 now; consumption was indulged in only by the well-to-do. 30 The middle frequency curve shows how much more 20 predominant became the higher-priced types by 1907, 10 because of technical changes in design. The distribu- 0 II I Under '675 '875 • 1375 •4775 • 2275 • 2775 *3775 *4775 tion of frequencies here is such that the drawing of a *675 -0 875 -61375 -01775 -02275 -4.2775 -03775 -04775 60ver 1. smooth curve has not been attempted. Finally, the 1 911 diagram for 1911 shows the full result of the strong movement toward very low-priced cars which began after 1907 and gained headway after 191o. Technical 30 knowledge, increased standardization of parts, constant

20 progress in manufacturing methods, and the temporary

10 saturation of the high-priced market were both the causes and the accompaniments of this great movement. Under 0675 '875 • 1375 • 015 *2275 *2775 *3775 .4775 • 675 - 4875 -'1375 -'1775 -.2275 -'2275 1.3775 -0+775 6e0Yer Chart 12: Frequency distributions of factory sales according to price-class, 1903, 1907, 1911.

kk 4111111=MMILwr. MARKET DEVELOPMENT, 1917-1926 103 measure be chosen arbitrarily; yet in motor manufac- ture 1916 appears, in many ways, to be the most logical year to select. It was the first year in which the pro- IV duction of automobiles exceeded a million cars. It was the last year before the somewhat abnormal war MARKET DEVELOPMENT, 1917-1926

4.000

1. General Characteristics of the Period 3000

FOR the great middle class to buy motor cars after 2000 1912, and for not merely the "middle" but the so-called 1 • "lower" classes in the income scale increasingly to be- come owners from 1916 on, required not merely that 1,000 the selling prices of automobiles be steadily lowered 700 and that their general quality be improved, but that 500 other developments contributing to the ease of both 400

Cars 300 acquisition and operation take place. These new devel- f o

opments may be grouped under four main heads: the ds

n 200 a introduction of the self-starter, the advent of the cord s tire, the manufacture of low-priced closed cars, and the Thou establishment of installment sales. Coupled with these 100 events occurred a marked expansion of the export mar- 70 ket; but this, while important especially during the last 50 few years, constituted only a comparatively slight part 40 of the total market expansion of the period 1917- 30 1926." Although one of these four factors, the electric self- 20 starter, was first offered and more or less widely intro- duced by 1913-1914, the others all came after 1915- 10 1903 04'05 '06 '07 '08 '00 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24 '25 '26 1916. Of course, any single year which is taken to mark off "periods" in an industry's history must in a Chart 13: Passenger automobile production in the United States, 5903-1926.

102 MARKET DEVELOPMENT, 1917-1926 105 104 THE AUTOMOBILE INDUSTRY period. It was about the last year during which the to more than merely the well-to-do classes of society; "straight-line" rate of growth in passenger car produc- while the period 1917-1926 has witnessed not so sharp tion, described and charted in the last chapter, was in a rate of increase, but nevertheless a continuous expan- evidence; since then, production has continued to grow, sion of that market through steady refinement in the but at a somewhat slower rate. Chart 13 on the preced- design and construction of the product and through im- ing page shows this plainly. The 1903-1916 figures portant newly developed methods of market distribu- are here charted again, and to the diagram is added the tion. curve for 1917-1926, which is dotted in order to differ- 2. The Self-Starter, the Cord Tire, and Other Refine- entiate it readily. The recent course of this production ments curve will be discussed in later pages; it may here be noted merely that the rate at which the industry ex- More than any other single thing, the development panded began to slacken somewhat after 1917. That of the electric self-starter served to extend the automo- its absolute growth, however, continued as astonishingly bile's scope of usefulness as a family vehicle. To crank as it did is largely because of the factors just suggested: many a car was none too easy a task even for strong the self-starter; the cord tire; the coming of the closed men, while in cold weather it sometimes became a car, and with it good roads; and the development of chore of long duration. In the very early days of the time payments. The steadily growing prosperity of the industry, about 1905, one of the trade papers relates country, too, has played a part, especially during the the case of an owner who himself always drove his car, last few years, in somewhat the same way as it did in but being a man of rather slight build, invariably car- earlier years from 1910 to 1916—as a contributing but ried along a chauffeur "solely to swing the crank past not the solely responsible factor. In part, the country's compression." But although by 1912 ignition devices prosperity has enabled it to buy automobiles; in part and had reached the stage where under also, the presence of more motor vehicles has promoted favorable weather conditions most cars could always prosperity. be started without "spinning," even a quarter turn or The period 1900-1910, then (the dates are arbitrary two of the engine was too laborious, too dirty, and with and only approximate), saw the automobile industry some motors, if one neglected properly to retard the entirely out of the workshop stage and successfully spark, too dangerous an act to be undertaken by a established as an important branch of American manu- woman. facture; the period 1911-1916 saw the comparative per- There had been some attempt at self-starting devices fection of its product and the extension of its market almost since the beginning of the industry. Alexander io6 THE AUTOMOBILE INDUSTRY MARKET DEVELOPMENT, 1917-1926 107 Winton, about 1907, invented a pneumatic device, prin- by 1914. A little later, electric starting was offered cipally because a large six-cylinder engine which the even on the Ford, although for some years only at an Winton factory brought out in that year was thought extra charge. too heavy to be turned by hand. Others had invented While after 1912 the four-cylinder open touring car both air, spring, and even electric devices, but seemingly continued to be the standard type of vehicle, it was a none of these possessed the capacity both to "spin" the greatly improved car, in comfort and performance, engine continuously and, after the car was running, compared with what it had been a few years previous. infallibly again to store up a sufficient supply of energy Reliability came to be taken more or less for granted, to repeat the operation as soon as necessary. Finally, and refinement began to be stressed. The Studebaker Henry M. Leland, then president of Cadillac, whose catalogue for 1913, for example, said proudly of the own technical contributions to the industry have been new model which it announced: "The convenience of many, encouraged a young engineer, Charles F. Ketter- the '35' is a noteworthy characteristic. A pull of a ing, to develop an electric starting system for that com- lever on the steering column starts the motor . . . . pany's cars. gear shift levers operate handily, and both front doors Here was a case neither of "accidental" nor of "in- open Press a button, and the brilliant electric spired" invention—the sort of thing which inventors' headlights illuminate the road." biographers so often glibly write about—but of a delib- Both the demountable rim, which came into wide use erate, calculated attempt to bring forth a definite de- about a year after the self-starter, and the cord tire, vice. Building upon the work of others who had pre- which was developed just previous to 1916 but not used ceded him (in this particular case, Clyde J. Coleman" at all widely, except on expensive cars, until several had earlier patented several engine starters, features years later, served also to remove much of the irksome- of which were later purchased by the owners of the ness and the expense connected with both city and Kettering patents), Kettering finally succeeded in pro- country driving. The demountable rim made changing ducing his starter, and the Cadillac for 1912 came out a tire child's play compared with the earlier practice of with complete electrical equipment. Other cars soon removing the entire casing and tube and repairing the followed: the next year, 48 manufacturers provided puncture on the road, or, at best, substituting a new starters on their machines, and by 1914 there remained tube. The letters patent connected with demountable only five companies, or about 8y0 of all makers, who rims, removable wheels, and similar devices are sev- did not offer this feature. Thus what would have been eral; to whom the principal credit for the development regarded as a luxury before 1912 became a necessity belongs it is difficult to state. 108 THE AUTOMOBILE INDUSTRY MARKET DEVELOPMENT, 1917-1926 109 50 The cord tire, which provided both easier riding and High Pressure longer wearing qualities than did the less flexible fabric ME Balloon casing, both lengthened car life and conduced towards 40 the greater comfort of the motorist. Although the cord *40 at first cost more to purchase 2 JO than did the fabric type, the greater mileage which it af- 2 forded caused both manufac- 20 turers and the public soon to adopt it widely. With its widespread use its price, rela- tive to that of the fabric, was

greatly lowered. Chart 14 19 24 925 1921 illustrates this decline in the Chart 15: Production of high-pressure tires and balloon tires. price spread between the two types. Chart 15 shows the and 1914. The other chart is similarly constructed, but more recent tendency to- is for four-wheel brakes in 1923, 1925, and 1927. The wards the use of the resilient, pressure of competition to sell stimulates the progress-

- Cord low-pressure balloon tire, an- sive manufacturers constantly to seek better devices --Fobri other great refinement which, or designs, while the same pressure of competition then together with four-wheel forces others to follow or be left behind in the race.

brakes, has made rapid head- In spite of the many checks upon what the economist 1919 1921 1922 1923 way since 1923-1924. calls "free" or "perfect" competition—checks which Chart 14: Consumer prices of cord and fabric tires, 3o" x 3%" (Ford Charts 16 and 17 illustrate undoubtedly do exist in many quarters of the industrial site), 1010-1023_ the rapidity with which im- world—no better proof of the fact that the force of portant new improvements are adopted by all mak- competition is not merely an abstraction, but does really ers, under competitive conditions, once one or more operate, is to be found than in the automobile industry. makers have introduced it. The one chart shows the Fortunately, however, by virtue of an enlightened and percentage of makers offering a self-starter as standard unusual patent agreement to be described in another equipment on any of their cars in the years 1912, 1913, chapter, automotive competition has been in a sense iro THE AUTOMOBILE INDUSTRY MARKET DEVELOPMENT, 1917-1926 III

40% - 60% 90% 100% I00 0% 20% 402 00% 80%

1912

1923

1913 1925

1914

1927

With Setf-Starters Mthout Self-Starters WithFour-Wheel Brakes I I Without FourWheel Brakes Chart 16: Percentage of manufacturers offering cars with self-starters as standard equipment. Chart 17: Percentage of manufacturers offering cars with four-wheel brakes as standard equipment. "cooperative" in its character; in the main, new devices they cost from about 30% to 50% more. They were and refinements of construction have become avail- chiefly limousines and coupes, rather than sedans, and able to whichever firms wish to make use of them. they were owned principally by the wealthy who either 3. The Rise of the Closed Car employed chauffeurs or owned two or more cars, or by physicians or others whose duties necessitated an all- In 1916, "the car of the American family," to use a weather vehicle the year round. The total number of phrase which must be credited to Hupmobile, was the closed cars made in 1916 came to less than 2% of the open touring car. True, a folding top was supplied total automobile production. as standard equipment in all cases; one did not have to After 1917, this figure gradually rose, as Chart 18 pay from $85 to $159 extra for this adjunct as in for- indicates. But not until 1921 did closed car production mer years. Further, it had just become a "one-man" amount to more than one-fifth of the total. Today it top. Side curtains also were furnished, although they stands at nearly three-fourths (72.0% in 1926) of the were difficult to adjust and greatly impaired the driver's entire motor car output. vision of the road when they were all in place. In part, good streets and highways have made this Closed cars, of course, existed. But they were tre- possible. Closed cars were not, in earlier years, well mendously expensive in comparison with the open ones; suited for country touring. Rough roads and relatively I12 THE AUTOMOBILE INDUSTRY

100

90

80

70

60

50 OLDSMOBILE, 1902 FIRST FRANKLIN, 1902 40

30

20

10

0 VELIE, 1912 FRANKLIN, 1914 1015 1016 1917 1916 1919 192 0 1921 1022 1923 1924 1925 1926 Chart 18: Percentage of closed car production to total passenger car output, 1915-1926. poor body construction shook them to pieces; windows loosened, sashes cracked, the whole body rattled. But well-paved roads enabled closed cars to be used more frequently for long trips, and the increased demand for 0927 HUDSON, 1922 FRANKLIN, closed vehicles caused manufacturers to give more at- tention to their design and construction. Quantity Figure 141 THE EVOLUTION OF THE CLOSED CAR. production again brought down prices, and lower prices The Oldsmobile model for 1902 shown above was announced as a car to again extended the market for the product. To fit which "all roads and seasons look alike." The Velie is the first closed car made by that company. The Hudson model is the first coach, produced in better the pocketbooks of those who wanted closed cars 1922. The three Franklins represent an evolution of body type begun in but felt that they could not afford to pay so great a 1902 and culminating in the company's "25th Anniversary " two and one-half decades later. The middle Franklin picture is the first sedan mar- differential as then prevailed, the Hudson company in keted by the company.

113 114 THE AUTOMOBILE INDUSTRY MARKET DEVELOPMENT, 1917-1926 115 1922 introduced the "coach," a five-passenger two-door once again, like the self-starter and various other im- closed model which sold at only $50 to $roo more (a provements in design and construction, the closed body, differential of from 3% to 6%) than did the open cars by virtue of its year-round availability, promoted the on the same chassis. This example was followed within purchase and use of cars, through lowering the "per a year or two by nearly all other manufacturers, and the mile" expense of their operation to the consumer. year 1925 saw more closed cars sold than open ones. Chart 19 shows the marked recent decline in the Again, like so many other things which have occurred "spread" between the prices for closed cars and those in the automobile industry, had this development been for open cars from 1922 to 1926. The figures plotted predicted by anyone a few years before it actually took are the average prices of six makes of open cars and of place, it would not have been believed possible. And the corresponding closed cars, of the same makes, offered

150 in each year on the corresponding chassis, the open car prices being expressed as loo and the closed car prices as indexes of each year's open car prices. Low-, me-

" 140 dium-, and high-priced cars are included; the six makes are Ford, Chevrolet, Hudson, Paige, Packard, and Cadillac. It will be noted that a closed car can now ('' 130 be bought for approximately the same price as an open one.

120 4. Introduction of Installment Sales About 1913, at the Chicago Automobile Show, one of the exhibitors distributed as souvenirs small enameled 110 buttons, which were pinned on one's coat lapel like cam- paign buttons during election times. These buttons bore

100 the somewhat inelegant but emphatic declaration, "It's Hell to be Poor." The implication was, of course, that the great advantage of being more or less wealthy was 90 1922 that it enabled one to own an automobile. 192 3 1924 1925 1926 That was about 1913; in that year 460,000 cars were Chart so: Index numbers showing the average spread between closed- and open-car prices, 1922-26. (Open-car prices in each year taken as soo.) produced. Ten years later, in 1923, one could buy a 116 THE AUTOMOBILE INDUSTRY MARKET DEVELOPMENT, 1917-1926 117

brand-new automobile by paying as little as $300 or Credit Company). .From the comparatively small $400 "down," and the balance in from eight to ten amount of retail automobile financing started by these monthly installments; in that year, 3,500,000 cars were companies in 1915-1917 has grown the annual $2,500,- sold. By 1925, 75.5% of all cars, both new and used, 000,000 volume of installment sales of today. were sold on the installment plan; a total of $2,642,- That the time payment plan came widely to be ap- 000,000 worth of new automobiles were marketed "on plied in automobiles by about 1923 means merely that time," and the average volume of installment paper the motor industry had by that time come to maturity outstanding was approximately $1,049,000,000." To- and that its product had been perfected. It was this day, 64% of the new cars, and probably a somewhat maturity of its product which made possible the suc- larger proportion of used cars, are bought on time." cessful inauguration of time payments. Installment Such a huge volume of installment operations brought selling of motor cars would have developed long before forth severe criticism when first the facts became had not the mechanical construction of the product, known. Yet the economics of installment selling are prior to about 1912-1916, been so imperfect that too neither so complicated nor so novel as to occasion any great a risk would have been involved. great alarm provided that reasonable discretion is em- As a matter of fact, as early as 1912-1914, sporadic ployed in the exercise of this important marketing de- cases of "time payment" did appear, although they vice. Time payments long have been known, and have were not known by that name. Occasionally, sales operated successfully, in the sale of sewing machines, were made on the basis of a 66% to 75% down pay- pianos, and other durable goods. Houses have always ment, with the balance represented by one or two prom- been built and sold with first and second mortgages, issory notes given the dealer directly by the customer the principals of which in many cases have been and maturing, say, one in three months and the other amortized by the buyer through monthly, semiannual, in six months from the date of purchase. The privilege or annual payments. Between about 1915 and 1917, of making such a purchase was, however, limited to per- several finance companies which had for some years pur- sons of some financial standing in the community, who chased receivables in other trades began to experiment merely preferred to buy their cars "out of income in- with automobile installment paper. The early operators stead of capital," as the current phrase goes, and whom in this new field of commercial credit seem to have been the local dealer thus obliged if his own financial condi- the firms of John L. Little (now the National Bond and tion permitted him to do so. Today, however, the Investment Company), Henry Ittleson (Commercial financing of automotive installment sales is carried on Investment Trust), and A. E. Duncan (Commercial almost entirely by financial specialists, the "finance 118 THE AUTOMOBILE INDUSTRY MARKET DEVELOPMENT, 1917-1926 119 companies," of which there are several hundred in the ily budget making. If the total amount of an indi- United States. vidual's outstanding installment debts is so large that The economic effects of such installment selling are the burden cannot possibly be met out of earnings, then alleged to be many and various. It is not proposed here this planned apportionment of one's income becomes a to undertake any very extended discussion of this sub- regrettable rather than a financially desirable experi- ject. To say that the time payment plan enables per- ence. But such a condition, as before stated, cannot sons to live "extravagantly" depends entirely upon continue for very long excepting in isolated cases. one's definition of extravagance; it may mean merely When it does occur, it is usually because the dealer's that the extravagance consists in the other person's buy- credit policy has been too lax, a condition which better ing something that the critic chooses not to buy himself credit methods can readily correct. and therefore condemns. If, however, it be declared Such unsound credit policies, however, were prac- that time payments promote one's "living beyond his ticed by a number of automobile dealers in 1925 and income," a somewhat clearer statement is then put for- the early part of 1926. The keen competition to sell ward for discussion. Admittedly, the installment plan cars brought the down payment, which in the purchase may do this for a time, but only temporarily. In all of new cars had previously been 40% to 50%, to below cases, the day for settlement eventually arrives; unless 33% or 20%, and in some instances to as low as 10%. the debtor keeps constantly on the move to avoid his The time granted for payments, which had been from creditors, he can hardly continue to live much beyond eight to ten months, was increased to twelve, sixteen, his means for an indefinite period. or even eighteen months. The average note given by But although installment credit may tempt some the purchaser of a new car, between the end of 1925 buyers to try to live beyond their incomes, there can and 1926, increased from $55o to nearly $600. be no doubt that for other persons it has promoted As a result, several failures both of dealers and increased thrift and stimulated productive efforts. finance companies occurred, and both the National As- Most individuals work harder when the spur of ambi- sociation of Finance Companies and the National Auto- mobile Dealers Association took action. Each body tion prods them, and the ownership of a motor car is something to which almost every wage earner in Amer- assembled in convention and adopted resolutions rec- ica has within recent years aspired. Time payments ommending that all retail automobile financing of new have made it possible for many to realize this longing, cars be conducted on the basis of a minimum 33% and arranging to liquidate the obligation has doubtless down payment, with the balance in no more than twelve given many persons their first lessons in successful fam- monthly installments. For used cars, the minimum 120 THE AUTOMOBILE INDUSTRY MARKET DEVELOPMENT, 1917-1926 121 down payment was set at 40%, with the balance in no 2. The maximum time of deferred payments must be short more than- enough [to insure] that the depreciation of the article will not twelve months. These requirements, known absorb the equity of the purchaser or security of the lienholder in the industry as "standard terms," are now followed before the last note matures." by most finance companies and dealers. When these two principles are held to, the "sound- Like all other large new developments, automotive ness" of automobile sales on time seems clear beyond installment selling has had problems to solve and abuses reasonable doubt. The following figures for reposses- to correct. But the is not that these difficulties sions of new cars (cars seized under the mortgage or lien have appeared, but that, in the aggregate, they have because of the failure of the purchaser to meet the pay- really been so few in number and seem to be so rapidly ments) show how relatively few are the instances in approaching correction. The grave fears entertained which the consumer is unable to meet his obligation two or three years ago that the continued motorization when the sale is made on standard terms: of the country, through the machinery of time pay- 1925 1926 ments, meant its demoralization and spelled economic Percentage of time sales repossessed and financial chaos are already proved as groundless as where down payment was 30% of many "grave fears" of new movements often are. The the time selling price 1.72% 2.09% same things were said in 1912-1914, before the days But note how these slight proportions increase when of installment selling: it was feared by many that the the standard terms are departed from: "continued diversion of capital" to the automobile in- 1925 1926 dustry would result in either economic stagnation or Percentage of sales repossessed where industrial crisis. Yet both our national income and down payment was 25% of the automobile registrations have since those years greatly selling price 3.81% 4.02 % Where the down payment was less increased, and they both continue to grow. than 25% of the time selling price. 10.96% 11.52% The experience of several hundred finance companies These percentages, which are totals or averages rep- seems to have demonstrated that there are but two fundamental principles which need to be followed to resenting the composite experience of 150 finance com- panies, all increased somewhat from 1925 to 1926 be- insure safety. These have been briefly stated by Mr. cause of the tendency on the part of some companies C. C. Hanch as follows: to depart from sound credit terms in the latter part I. The down payment made by the purchaser must be large enough to make him feel that he has a real equity in the purchase of 1925, a tendency which continued until corrective and is not merely a renter. measures were taken towards the end of 1926. 122 THE AUTOMOBILE INDUSTRY MARKET DEVELOPMENT, 1917-1926 123

The extent to which this corrective work, sponsored 100 ' Ns."4•1",",.. by the two associations just mentioned, has proceeded is shown in the fact that whereas in November, 1925, the average percentage of automobile paper calling for 90 thirteen or more monthly payments was 18.3%, such paper amounted in November, 1926, to only 13.2%. Likewise, in 1925 the paper written with a down pay- 80 ment of 25% or less on new cars made up 19.3% of the total, while by November, 1926, this figure had been reduced to 9%. Due to this substantial stiffening 70 in the terms of purchase, the repossession figures for 1927, when they become available, may show some- what reduced ratios as compared with 1926. Further 60 figures in connection with repossession, as well as sta- tistics upon other phases of time payments, may be found in Appendix A, page 322.

5. Production by Cylinder and Price Classes Quite as marked as the adoption of the closed car during the latter part of the period 1917-1926 has been the shift from the four-cylinder to the six-cylinder type of engine. In 1917, 80% of the cars made were fours and less than 20% sixes. By 1926, only about 6o% were fours and nearly 40% were sixes. The shift, however, becomes far more striking if the 20 percentages are calculated exclusive of the Ford. The 1917 figures are roughly the same as before, but the 10 A A A AA 1926 figures show only slightly more than 40% of the • P" • re-Ar cars to be fours, and 55% to be sixes. In other words, the six-cylinder automobile, which previous to 1916 was re- 0 • , .4 A %A A 1917 1910 1919 1920 19 21 1922 1923 1924 1925 1926 Chart zo: Factory sales of passenger cars by cylinder classes, 1627-1926. 124 THE AUTOMOBILE INDUSTRY MARKET DEVELOPMENT, 1917-1926 125 41; garded as more or less of a luxury, has now become the 100 standard type in cars selling at $1,000 or over. There 12 Cy finders are even several popular makes of cars selling between e Cy finders $700 and $90o which have six-cylinder motors, but in 90 Nig total volume the six does not yet dominate this field as it does the higher price classes. It may, however, soon do so, if the present trend in any way forecasts so future developments in this direction. Cyli ders Of the other cylinder types marketed between 1917 and 1926, little need here be said. The twelve-cylinder 70 au engines introduced in 1916 were mainly limited to comparatively high-priced cars and were not long con- tinued save by Packard, which first offered the "twin 60 six" in this country. Even this company, however, abandoned its twelve in 1922 in favor of the "straight" or "line" eight type an example which several other 5o makers have followed. But although either the "V" type of eight introduced by the Cadillac Company in 40 1914 or the more recent line eight is now made by a number of manufacturers, the aggregate production of eight-cylinder cars is not yet large relative to the entire automotive output. It will be noted, however, that 30 from 1923 to 1926 the figure for eight-cylindered pro- duction has increased from i.o% to 2.2% (or without 20 including the Ford production, from 2 . 1 % to 3.3%), of the total output. Further details connected with the trends of production by cylinder classes may be seen 10 in Charts zo and 21. The growth of the market by price classes of cars, over the period 1917-1926, evidences no changes of • A A •A AA 1917 1918 1919 1920 1921 1922 1923 1924 1925 1926 Chart 21: Factory sales of passenger cars by cylinder classes, Ford pro- duction excluded, 1917-1926.

126 THE AUTOMOBILE INDUSTRY MARKET DEVELOPMENT, 1917-1926 127 4,000

3,000 of increase for the two upper curves is somewhat less

2000 for this period than that which obtained prior to 1916, although the top curve, that for low-priced cars ($1,375 or under), is still climbing upward. 1,000

It is of exceptional interest to note that Curve C (high-priced cars) mounted rapidly from 1917 to 1920. 500 /'•

f Cars orofts... 400 • It will be recalled that in Chart II, Curve C had be- o 300 come approximately stabilized; during the years 1912- ds

an 200 A-Low-Priced Cars 1916 it averaged but little more than a replacement B- Medium-Priced Cars demand, which was estimated at about 17,000 cars a C -High-Priced Cara Thous 100 year. An observer in 1915 might well have said that the absolute market for high-priced cars would grow

50 no further. Yet see what took place. In 1919, the 40 curve began to mount sharply. In that year over 30 35,000 cars of this class were sold, and in 1920, over .• ••• 20 roo,000 were marketed. Since 1920, the sale of high- 1917 1915 1919 1920 1921 1922 1923 1924 1925 1926 priced cars has declined, but it still stands at a level Chart 2 a : Production of low, medium, and high-priced cars, 1917-1926. from two to three times as high as that to which it such striking character as does the shift in cylinder seemed firmly anchored in the years 1912-1916. That types during the same period. Except for the war years this increase in sales from 1918 to 192o was due partly and the period of postwar inflation, followed by the to the change in the general purchasing power of the readjustments of 1921-1923, the percentages of total dollar is, of course, true; but that it was by no means production in the price groups below $1,375 does not due solely to that cause seems borne out by the fact become markedly altered. Before examining the exact that the curve continues upon such a high level even course of these percentage relationships, however, let after the period of deflation has taken place. Prices for us note the actual sales figures for low-, medium- and cars of every class are now lower than in 1912. high-priced cars as shown in Chart 22. To summarize: The present situation with regard The three curves of this chart continue for the period to sales in these three broad classes of cars is that the 1917-1926 those shown in the previous chapter (in market for high-priced cars, after growing greatly since Chart 11, page 93) for 1903-1916. The general rate 1917, fell off somewhat since 1920, but stood in 1926

MARKET DEVELOPMENT, 1917-1926 129 128 THE AUTOMOBILE INDUSTRY at a level nearly four-fifths as high as that of 1920. The market for medium-priced cars from 1917 to 1920 continued its expansion at about the same rate as that which it had enjoyed from 19ro to 1917, but since 1920 it has slightly tapered off. Its rate of growth has not slowed down so markedly, however, as has the curve for high-priced cars. Between 1925 and 1926, this curve for medium-priced cars, alone of the three curves, underwent an absolute decline; but this decline is doubtless attributable to recent reductions in the prices of closed cars which brought a number of $1,400 and $1,5oo cars within the "$1,375 or under" class. The top curve, that for low-priced cars, has risen most steadily of all, although its rate of growth from 1917 to 1926 has been less than for the period prior to 1916. However, for the years 1924-1926 it is still on the in- crease, more sharply so than either of the two lower curves. Return now to the percentage figures for the various price classes as shown in Chart 23. The increase in the proportions of the cars selling at above $675 is due principally to the higher prices which automobiles, in common with all commodities, enjoyed during the period 1916-1920 and is in no way connected with any developments peculiar to the automotive industry. The reversal of this trend from 1921 to 1924 in part repre- sents merely the opposite situation, one of a generally declining commodity price level. In part it also rep- resents, as do even more largely the shifts from 1924 to 1926, the increased effectiveness of the automobile

1917 1916 1919 1920 1921 1922 192.3 1924- 1925 1926

Chart 23: Factory sales of passenger cars by price classes, 1917-1926. 130 THE AUTOMOBILE INDUSTRY MARKET DEVELOPMENT, 1917-1926 131 industry in making and marketing its product at lower high-priced cars—among them, for example, Pierce- costs and prices, plus the presence of the time payment Arrow and Packard—now announce in their advertising plan, which brought into the market vast numbers of that the convenience of the deferred payment plan is new buyers whose comparatively low incomes led them available to the buyer is seemingly evidence that a wide to buy the Ford, Chevrolet, Essex, , and other low- demand for such financing service exists even here." priced cars in tremendous quantities. That the pro- portion of cars selling under $1,375 is in 1926 only 85%, as against 91% in 1916, does not mean that the automobile is any less "the average man's" vehicle, but only that the "average man" now buys a closed car instead of an open one. The difference of $roo or $150 which still obtains, between the closed and open models, in some makes selling at around $1,375 probably now brings many older buyers of, say, $1,200 or $1,300 cars barely into the "$1,375 or over" class. It may also be true that the decline of the 91% figure to 85% is to be explained partly by the fact that the institution of time payments has permitted some persons who would otherwise have bought low-priced cars to purchase medium-priced ones. It should not be assumed, however, that sales on time are confined to low-priced or even to medium- priced vehicles. In spite of the common impression that a far greater proportion of the higher-priced cars is sold for cash than of the lower ones, such is in fact not the case. No complete figures on this point are available, but sample investigations among dealers handling various classes of cars indicate that in this respect there is very little difference between classes of buyers." That a number of the leading makers of METHODS OF MARKET DISTRIBUTION 133 cars may be distributed: factory to retail dealer, fac- tory to distributor (wholesaler), factory to branch. V Actually, no one of these three possible systems seems ever to have been employed as an exclusive method, except in one remarkable instance in which all the retail METHODS OF MARKET DISTRIBUTION dealers had a direct contact with the factory. Most manufacturers have utilized both factory branches and 1. Retail and Wholesale Distributive Channels wholesale distributors, or both wholesale distributors WITH the geographically wide market for cars which and retail dealers, some of whom may enjoy a direct has existed from the start, and with the pronounced contact with the factory, or other similar combinations localization of the industry which occurred fairly early of these three types of intermediary between factory in its history, particularly around Detroit and Cleve- and final buyer. land," it was practically impossible for any manufac- Five such schemes of market distribution which have turer to sell his product direct to the consumer. In- actually been employed by manufacturers are depicted stead, the typical procedure was to dispose of his output in Chart 24. System A, in which branches, wholesalers, by selling to dealers in each community, who in turn and retail dealers are all used, has been one most fre- sold the cars to the public. Sometimes but one set of quently essayed; systems B and D next most fre- middlemen was employed—the retail dealers. But quently; C next; and E, where the manufacturer dis- more often, especially after a factory had been in oper- poses of his entire output through local retail dealers, ation a year or two, wholesalers in certain centers were hardly ever." also appointed, a large dealer becoming the distributor Though a large number of factories today operate for an entire territory. Not merely a town or city, but no branch houses whatever, or else operate but one or a whole state or even several states, was allotted to two such branches, most of them at one time or another such a distributor, who then sold to local retail dealers have tried the branch system. A questionnaire which of his own appointment. As a third possibility for dis- the writer circulated in 1926 in order to obtain infor- posing of a part of the product, the manufacturing mation regarding marketing practices called for the company itself sometimes established branches in one checking of each year in the history of the company dur- or several centers, instead of appointing distributors ing which it had employed branches, distributors, direct there. dealers, and requested that in the event that branches There are thus three main channels through which had once been employed but later discontinued, the

132

7`°1471-77".7, 41=11=1111111111r 134 THE AUTOMOBILE INDUSTRY METHODS OF MARKET DISTRIBUTION 135 the reply which predominates is interesting. It is sim- A f Factory ply that it was extremely difficult to find branch man- r ( Branch I ( Dealer 1 agers who proved as competent as did the wholesale 1 Distributor 1 _I distributors who had their own funds invested in their Dealer Dealer establishments. One would naturally expect the manu- sumerCon [Consumer I Consumer I Consumer 1onsumer C 1 facturing company to operate branches if it can; it is a more direct method; it maintains factory contacts B I Factory 1 with both local dealers and consumers." Further, the 1 I simultaneous operation of several branches ought pre- Distribute Branch I --I sumably to reduce sales expense. Yet so great is the Dealer Dealer single obstacle just mentioned in the way of successful branch operation that comparatively few manufacturers Consumer Consumer Consumer 1 Consumer 1 have developed branches at all widely. This is true of

C 1 Factory I passenger cars. In the sale of trucks, certain service 1 I and other factors make branch house operation more Branch 1 Dealer essential, and there the system enjoys a much wider 1 i 1 vogue. Dealer 1 It is worth while to quote from several of the replies, Consumer Consumer 1 Consumer 1 just to indicate the unanimity of experience which pre- I Factory I vails. The following excerpts are from separate an- D I Factory j E- i I swers received from executives of five different com- I 1 Dealer 1 Distributor 1 Dealer [ panies: I _ The fact is that passenger cars sold by branches have not been Dealer I generally a success. It is hard to get a manager . . . . to handle I 1 Consumer I the company's money, make trades, and so on . . . . to compete Consumer 1 f Consumer 1 Consumer ( 1 with a dealer who has to work upon his own investment and pro- Chart 24: Distributing systems in use by automobile manufacturers. tect it The retail motor car business has many leaks, and we find it reasons for such action be stated, if the company cared extremely difficult to find managers who do not waste considerable money. . . . . to confide them. It is difficult to get good managers who have no money invested. A number of firms complied with this request, and . . . . If a dealer has a financial interest in his own company, 136 THE AUTOMOBILE INDUSTRY METHODS OF MARKET DISTRIBUTION 137 he is found to be much more satisfactory than a branch manager, legal sense, at all, but a wholly independent merchan- who has practically no financial interest in the branch. . . . . We find in a general way that even a man who makes a diser who purchases automobiles from the factory at "fair to middling" dealer lies down and quits completely when put the wholesale price and sells them to his customers at in charge of a factory branch—where the urge of actual, personal the retail price. Though he buys the product outright, incentive is less strong. however, he does so under contract. He may agree each year to take a predetermined number of cars. In con- 2. Characteristics of Distribution Through Dealers sideration of this, he is ordinarily given exclusive terri- Where the branch house system is not employed, four tory, that is, he is the only one to whom the factory will characteristics of automobile marketing through dis- sell in his town or neighborhood. But ordinarily the tributors and dealers are to be noted. The first of these contract is terminable at the option of either party upon is that the product is never shipped on consignment, thirty days notice. but is sold outright. The second is that all factory sales The second characteristic of these distributive ar- are made for cash. The third is that those interme- rangements is the striking fact that from the very begin- diaries who are wholesalers invariably sell at retail also. ning all sales made by the factory have been strictly And the fourth is that, though the product is sold out- for cash. Not only are sales to dealer and distributor right, the factory may and usually does exercise a large upon a strictly cash basis, but these purchasers have degree of supervision and control over the businesses of actually often put up deposits, paying 2%, 5%, or '0% both dealers and distributors. of the purchase price in advance of delivery. Such From the beginning, both consumers and members of stringent cash arrangements and such a system of de- the trade have often spoken of the automobile dealer's posits are to be found, as customary usages, in the his- place of business as the "agency" for the particular tory of no other industry of which I have knowledge. make of car there handled. But it has in fact never been How are they to be accounted for? an agency at all. Though the factory assists the dealer in The answer seems to lie in the character of the prod- his sales through advertising, thus assuming some of the uct and the conditions of the demand for it. As has responsibility for the "demand creation" function, it been pointed out above, the purchase of an automobile entirely gives up title to the product when it puts it entails a large outlay by the consumer. It was felt in the dealer's hands. The retail dealer (and the whole- that unless the dealer discouraged the practice, the sale distributor also) stores the goods, assumes the risks consumer would request the privilege of making pay- involved in carrying them, and finances the transaction. ments over a considerable period. But in the early He is not a representative of the manufacturer, in the days of the industry, such installment selling could not 138 THE AUTOMOBILE INDUSTRY METHODS OF MARKET DISTRIBUTION i39 cash, the manufacturer made it practically impossible for him to sell to the consumer other than for cash, for local banks would not then finance him. When the first curved-dash Oldsmobile was marketed in 1900, R. E. Olds announced to his dealers that cash was the only basis upon which production and sales could sat- isfactorily take place, and that hence the Oldsmobile would be sold only in that manner. This inaugurated the policy; the example was followed by all the other manufacturers who swung into quantity production after Oldsmobile had pointed the way. Dealers' deposits, however, were not at first de- manded by manufacturers. Strange as it may appear, Figure 15: A SALESROOM OF 1899. they were voluntarily offered by the dealers themselves. well have succeeded. As has been suggested already, The reason was that under the strictly cash arrange- the automobile in its early days was both a new and ments in force, the automobile factory has always an uncertain mechanism. It gave trouble to the best shipped cars with sight drafts attached. Certain deal- drivers and to the most mechanically minded persons; ers objected to this. Few other merchants in their town how much greater and more numerous the annoyances were drawn against in this manner, and the procedure which its complex construction could offer to the inex- seemed to cast a doubt upon their credit standing. perienced and to those not mechanically inclined! If Hence arose the practice of depositing a certain fund the factory had sold on open book account to the dealer, with the factory, of having this fund debited whenever many dealers, it was feared, would have sold cars on cars were shipped, and then renewing it again.'" three months' or six months' time to the consumers. Later, the factory insisted upon such deposits from And many consumers, manufacturers well knew, would dealers, though often in varying amounts per car, ac- never have paid. The risks of mechanical or other acci- cording to the caliber and business standing of the dents to the car were too great, the market for used cars merchant."' Frequently, such dealer deposits consti- was restricted, and the dealer's equity in a car sold on tuted an important source of working capital for the 102 time would have been subject to an extremely rapid manufacturing company. The fact that the demand depreciation. By thus selling to the dealer only for for cars rapidly expanded, that during many years deal- 140 THE AUTOMOBILE INDUSTRY METHODS OF MARKET DISTRIBUTION 141 ers at certain seasons "stood in line and begged for ably continues to ship its cars "Sight Draft against Bill cars," facilitated the requirement of deposits.'" of Lading." The wholesaler or the retailer, when he Another reason for demanding that business be done needs credit, obtains it elsewhere, ordinarily from his on a cash basis, apart from the character of the auto- bank or from an automobile finance company. mobile as a complicated mechanical product liable to The amount of these wholesale operations (what, in disorder and accident, was the very limited financial short, may be termed "dealer financing" in contrast responsibility of many of the dealers. Most of the men with "consumer" or installment financing) which the available for "franchises" were small merchants—bi- automobile finance compa- cycle dealers or repair men, hardware dealers, lock- nies now carry on is not at all smiths, or electricians. They were the logical persons large in comparison with the to handle motor cars in their communities, for few volume of retail installment others could arrange readily to give the mechanical paper which they carry. This service which the consumer required. Thus with few is due to the fact that the ad- exceptions (John Wanamaker in New York and Phila- vent of the closed car has delphia was a notable one) the retailer of automobiles greatly reduced the extreme was a man against whom an action at law would avail seasonal fluctuations which little, for he was possessed of few assets. This is the formerly prevailed. About reason, also, thinks one of the pioneers of the industry, 1915-1917, when wholesale for the inclusion in the dealer contract of a more or less or dealer financing together standard thirty-day termination clause; it was essential with retail or installment fi- for the factory not to be bound to continue disposing nancing first developed, the of its valuable product through a dealer who might not dealer often had great diffi- fulfill his contract—one who, through incompetent culty in meeting the sight salesmanship or poor service, might not be able to take drafts, bill-of-lading attached, his agreed quota of cars."4 which covered the shipments Figure x6: A New York City But even today, with the industry's product per- automobile "salon," the extreme of the manufacturer during fected, with about two-thirds of all cars retailed on development of luxurious quar- ters for motor car merchandising, the dull winter months."' credit, and with substantial types of business men as 1926. Through the services of the dealers whose assets in some cases may amount to sev- finance company, however, under either the "warehouse eral hundred thousands of dollars, the factory invari- plan" (where the cars are stored by the dealer under a

,40112=5:011W" 142 THE AUTOMOBILE INDUSTRY METHODS OF MARKET DISTRIBUTION 143 trust receipt or other instrument given to the finance a given make in the same city, the distributor in that company) or the "floor plan" (where the dealer holds city invariably, and the branch in most cases, continues the cars in his display room or elsewhere), the dealer to retail. at once obtained from 8o% to 9o% of the invoice price One reason for the fact that the wholesaler of cars of the cars' and was enabled in this manner to accept is also a retailer is, of course, that usually he started the shipments of the manufacturer the year round. The as a retail dealer and then later took on the wholesaling more continuous operation of the latter's factory was function. More important, however, is the fact that thus promoted, and production costs were kept down the automobile business is one which easily lends itself in consequence. Since about 1921, the great vogue to the combination of wholesale and retail activities. attained by the closed car has both conduced to the The product is not packaged; it does not come in hun- further stabilization of factory operations and has re- dreds or by the gross. The individual car is always the duced the necessity for dealer assistance from the unit of sale, and wholesale transactions are merely rela- finance companies on the wholesale side of the market- tively small multiples of retail transactions. Since cars ing process. On the retail or installment side, of course, must be carried in stock for delivery to dealers as they the year-round importance of the finance company is call for them, it is always possible to sell out of this now greater than ever, although the dealer still pays stock at retail. Further, the distributor must carry a cash to the factory for every car which is shipped to large stock of replacement parts, in order that dealers him. may readily replenish the stocks of parts which they The third characteristic of automotive distribution keep on hand locally. Thus the distributor would be through the several market channels depicted in Chart in a position to give service on cars, whether he sold 24 is that when wholesale units (either factory branches at retail or not. or independent distributors) are employed as inter- Not only are certain overhead expenses saved by mediaries between factory and dealers, such wholesalers using the same establishment for both wholesale and invariably carry on a retail business as well. For a long retail operations, but an additional advantage which time, in the immediate territory in which the branch or accrues is that the distributor keeps his touch on the the distributor was located, no dealers at all were ap- public pulse in the matter of car performance. Through pointed; it is only within the last two or three years giving service and handling complaints himself, he is that several automobile showrooms retailing the same in a better position than he would otherwise be to make make of car within a city have sprung up. But even suggestions to the factory, to appreciate the dealers' now, with one or more independent retail dealers selling problems, and to offer them advice.

WICIZIZZENEW' 144 THE AUTOMOBILE INDUSTRY METHODS OF MARKET DISTRIBUTION 145 3. Marketing Cooperation and Control by the Factory dertakes to insure that the ultimate consumers of his To be a satisfactory dealer, it is not enough that one product, the car owners, receive genuine factory parts buy cars and sell them. They must be sold in a manner and adequate, reliable service. which will reflect credit upon the factory, and after On the selling side, control is likewise exercised. All being sold, they must be so "serviced" that the reputa- companies cooperate with the dealer in assisting him tion of the car shall not suffer in comparison with that with his local newspaper advertising; ordinarily, the of other makes. Short-sighted policies of service, no expense is shared evenly. Most companies attempt to less than ineffective methods of sale, have caused the prescribe the general style which the advertising shall downfall of many a retail distributive organization. take; many even provide the copy itself, which, except The factory, therefore, is vitally interested in the man- for the insertion of the dealer's name, must be em- ner in which the retailer and distributor conduct their ployed verbatim. Similarly, some factories prescribe businesses. Few manufacturers feel that the methods the style of lettering to be used on display signs and the dealer employs, the equipment he uses, the place show windows; and some even attempt to make man- of business he occupies, are wholly or even largely the datory the adoption of a particular arrangement in dealer's own concern. The extent to which the factory the layout and design of the showroom. organization can dictate to the dealers in these matters But along with this prescription of local advertising depends principally upon how strategically intrenched and sales methods, the larger companies attempt to its product is in the public favor. If the make of car give the dealer another powerful aid in marketing his is a popular one, the dealer "franchise" is worth a great cars: each year the motor manufacturers spend several deal. There is then little to check the manufacturer's hundreds of thousands, if not millions, of dollars in control. He may not only prescribe what quantities national advertising. In magazine advertising alone, of replacement parts must be carried, but also the exact , Willys-Overland, Dodge, Buick, and Chev- prices at which repairs must be made. The factory rolet spent in 1926 well over three quarters of a million may not only require that all replacement parts be dollars each. The magazine advertising of all passen- bought from it and not from outsiders, but may, as do, ger car companies in 1926 amounted to $11,427,000. for example, the Ford Motor Company and Dodge Substantial as this sum seems, it averaged, however, Brothers, even send around traveling representatives only 0.4% of sales (wholesale value). The expendi- tures of twelve leading companies for magazine adver- to inventory and inspect any dealer's stock of parts tising in 1926 are shown in Chart 25. The growth in without advance warning. Thus the manufacturer un- the annual automotive expenditure for magazine ad-

'.41122;11=1111211C7v

METHODS OF MARKET DISTRIBUTION 146 THE AUTOMOBILE INDUSTRY 147 30 vertising by all motor car, motor truck, tire, and acces- .0" sory makers, as well as the figures for passenger cars 20 separately, over the period 1914-1926, is shown in Chart 26.107 The automotive grand total in 1926 was nearly $25,000,000 in magazines alone; including the other media used it is, of course, much higher. to 1.6 g Beyond specifying what the amount and nature of 0 the dealer's own advertising shall be, a few companies have at times even specified what the dealer's sales 2 6 5 should be; they have, in other words, told him how 4

1,0 0 0 3 - Passenger far Total 000 -- Automotive Total

2 1914 1915 1916 1917 1919 WS 1920 1921 1922 1925 1924 1925 1926 Chart 26: Total magazine advertising expenditures by automotive manufac- 700 turers, 1914-1926.

rs la l 600 much business he should do. In spite of the fact that Do

f the dealer is no employee of the manufacturer at all, SOO o

ds nor even an agent, certain companies have on occasions n a s 400 surveyed dealers' territories, set sales quotas for the

Thou season, and threatened to deprive the dealers of their 300 franchises if these quotas were not reached. 200 But it is greatly to be doubted if such a policy is a

100 wise one, even from the standpoint of the factory which practices it. Like all other ambitious merchandisers, the motor vehicle dealer desires and appreciates sales c w Y g p 2: help and, frequently, he is even willing to accept many 6 6a5,2 marketing suggestions which partake more of the na- Chart 25: Magazine advertising expenditures of twelve leading companies ture of orders than suggestions; but he does not ordi- in 1926.

11:1ZCOaillow"'” THE AUTOMOBILE INDUSTRY 148 METHODS OF MARKET DISTRIBUTION 149 narily enjoy being told the amount of business that he vast majority of instances, he actually sells them at must do in his own establishment. Such a mandate this advertised price.'" savors more of the "hired man" relationship than of That this has been so universally the case is some- market distribution through independent jobbers and what at variance with what one might expect to find dealers who have their own capital invested in their in an industry of this kind. The retail automobile enterprises. When scientific management was intro- business is subject to marked seasonal fluctuation. The duced by F. W. Taylor and practiced by his disciples demand for cars is at its peak in the spring, when some years ago, it may be recalled that labor objected often twice as many cars are called for as during some to it strenuously upon the ground that while it might winter months; it falls off somewhat in the summer have meant higher pay, it also tended to "drive" the months, declines still further in the fall, and is at its worker. So now it may be with "scientific distribution" lowest ebb again in winter. A retail automobile es- in the automobile industry—it 'may mean prosperity for tablishment, moreover, as subject to much the same the dealer, but it ought not to be so overdone as to expenses, excluding those for salesmen who are paid arouse his antagonism. A factory sales policy that aims on commission, all the year around, although the pro- merely to make the dealer dispose of a certain number portion of fixed or overhead charges to total expenses of cars over a given period, whether economic condi- is, of course, less than is the case in manufacturing. tions in his territory warrant it or not, is shortsighted. Nevertheless, the fixed expense connected with the ren- Dealer good will, in the long run, is as important to the tal of quarters, the administration of sales and service, manufacturer as consumer good will. Neither can be and the cost of demonstrators runs high. The distribu- permanently maintained by sales policies and practices tor's gross profit, that is, the factory's discount from which are too rigid to be reasonable, for the attainment the advertised list price, runs normally from 20% to of the one makes possible the other. 30%; that of the local dealer from 5% to 25%. If Somewhat less striking among the controls exercised the list price to the consumer were occasionally cut 5% by the factory over the dealer is the matter of price. or even o%, there would still remain something in the But this control is less striking only because it has way of a surplus to be set against seasonal "carrying seldom been objected to and is more or less customary charges." in other trades. The factory advertises its car at a Yet, in spite of the fact that one might expect that certain stated price, or, when it makes more than one these cuts often would be made, and in spite of the model, at certain stated prices. The dealer likewise fact that the manufacturer is legally powerless to pre- always advertises the cars at this same price;108 in the vent it, such price cuts have been made, on the whole, 15o THE AUTOMOBILE INDUSTRY METHODS OF MARKET DISTRIBUTION 151 rather infrequently. The influence of the manufacturer but may mean serious loss if conditions in the used in discouraging them, the feeling of many dealers that car market a month or two ahead should not meet it is not "reputable" to engage in such practices, above expectations. Indeed, some factories not only discour- all, the custom of a standard price and the acceptance age the making of deliberate price cuts in this manner, of the advertised price by most consumers without but advise the dealer as to just what allowances ought question, all have led to a system of price maintenance to be made on particular makes and models of cars of equaled in few other industries. To these should be other makes.11° added, of course, the consideration that because of the Price control, as well as controls of the other sorts thirty-day or other short-time termination clause in all just mentioned, is, of course, exercised over dealers by dealer contracts, the manufacturer has always pos- some manufacturers in other industries: in machinery, sessed the power to cut loose from any dealer at will; in toilet articles, in retail clothing, to cite three exam- and, the dealer "franchise" being an exclusive one, the ples. But in no other industry does the tendency to- factory is not legally compelled to sell at wholesale to wards dealer control as a whole appear to have devel- anyone with whom it does not choose to do business. oped quite so extensively as in automobiles. Probably Of late years, however, the maintenance of retail the reason this control of marketing activities has been prices is in some cases more apparent than real. The so widely attempted by motor manufacturers is that, allowance by the dealer upon the used car which he as has been earlier pointed out, the product is a valu- often accepts "in trade" on the new machine affords able one and is marketed through exclusive retailers a much practiced means of disguised price cutting. If in the various territories. The factory might suffer any used car of any make be offered to different dealers substantial losses on inventories, work-in-process, and in the same city, the valuations made may vary greatly. finished stores should the dealer, through having injured The practice of granting an allowance on a used car that the machine's reputation in his locality by reason of is more than the price at which it can be resold is, how- poor service or improper sales methods, be unable to ever, frowned upon by the factory and is probably dispose of his quota of cars. Another reason why con- becoming less rather than more frequent. It has its trol over dealers can be effectively exercised in the dangers for the dealer, in that he may easily go too automobile industry is that commonly only one, or far. The used cars ordinarily must be repainted or at most two, intermediaries handle the product before reconditioned before they are sold. Too high allow- it reaches the consumer; to keep one or two intermedi- ances on cars, or too many used cars taken in trade aries "in line" is much easier than to control three or over a short period, not only tie up his working capital, four. 152 THE AUTOMOBILE INDUSTRY None the less, that such a rigorous system of control has been maintained is of interest. In so far as it can be shown to have conduced towards the advantage of manufacturer, dealer, and consumer alike, its thorough and successful trial here may lead other trades to fol- low it in several respects. The market distribution of automobiles is competitive, but the conditions of com- petition are tempered by a definite and customary— and therefore well-known and expected—set of prac- tices which does much to avert that blind or cut-throat rivalry to sell which has been characteristic, at various times, of several other industries. And so long as con- ditions remain sufficiently "competitive" to protect the consumer against extortionate prices, there can be little doubt that such a tempered competition, with the rules of the game understood by all, is of more benefit to the community than "wild" production and market distribution unaccompanied by any checks at all upon the sellers. This concept of a "tempered set of competitive conditions" raises interesting and impor- tant problems of economic theory—problems which again go to the heart of the various theories of value and price.'"

4. Speed Competitions and Reliability Contests There remain to be noted, as a marketing feature during the industry's history from 1913 to 1916, the numerous reliability trials and competitions which were held. A number of races and exhibitions had been Figure 17: The first American automobile show (above) held in Madison Square Garden, New York City, in woo, and (be/ow) the thirteenth annual conducted prior to 1900, but it was only after that exhibition held in the same building 12 years later.

153 METHODS OF MARKET DISTRIBUTION 155 154 THE AUTOMOBILE INDUSTRY year that such performances came into full swing. It in the summer of 1905. It was open to all members is not necessary here to chronicle the march of these of the American Automobile Association115 or "any many events from year to year,'" but a few may be club in the world recognized by them." It was evi- noted as illustrative of what these contests accom- dently the donor's purpose to promote private touring plished. and automobiling in general, and not primarily to On the one hand were automobile exhibitions and found a competitive publicity contest for manufac- parades, upon the other, road and speedway races. turers; hence the stipulation that each car entered must In between these extremes of sport and daring ranged be driven by its owner. But while some lay owners various hill-climbing contests and reliability tours. did enter, most of the contestants were manufacturing Some of these were national, some local in scope. Some executives, many of whom themselves drove their cars. contributed virtually nothing to the technical develop- Thirty-three cars started the first tour, run through ment of the automobile, while others contributed a New England. Twenty-eight of them finished. Scor- great deal. Of the latter class, reliability tours and ing of performance was based on the frequency and races were the most important. All the contests, how- seriousness of the troubles which each car encountered. ever, had this much in common: they were competi- The best score was made, and the cup won, by Percy tive tests designed to show prospective purchasers Pierce, driving a Pierce-Arrow. Certificates of per- which make of car was best. Thus they may be re- formance were awarded to the 28 entrants who finished garded primarily as marketing devices. Had it not the tour. Among the manufacturing executives who re- been for the favorable publicity which manufacturers ceived such certificates were J. D. Maxwell (Maxwell), hoped to achieve, it is probable that few would have Walter C. White (White), R. E. Olds (Reo), Charles entered their cars in these contests. And because some E. Walker (Pope-Hartford).116 manufacturers participated, others felt that they could Of this tour a participant wrote enthusiastically: not afford to remain out. Mr. Ford, for example, re- The tour has proved that the automobile is now almost fool- marks that he was opposed to racing, but that, "As proof. It has proved that American cars are durable and efficient. the others were doing it, I, too, had to do it."'" It has shown the few who took part how delightful their short vacation may be, and it has strengthened our belief in the perma- Of the dozen or more reliability contests held each nence of the motor car.'17 year,' easily the most important was the Glidden Tour. A Bostonian, Charles J. Glidden, in 1903 offered When this was written, cars had been produced com- a cup, to be competed for annually in a tour of not less mercially for about seven years. While production in than r,000 miles. The first competition was to be held the preceding year (1904) was 22,000 cars, the total r 56 THE AUTOMOBILE INDUSTRY METHODS OF MARKET DISTRIBUTION 157 number produced since 1898 amounted to only about 5. Technical Contributions from the Early Tours 68,000,118 of which probably not more than 40,000 were Immediately after the tour of 1906 had been held, a in use. It is thus easy to see why the permanence of technical observer, Albert L. Clough,"° stated that the the motor car was still doubted in many quarters. We contest showed conclusively how imperative was the rather smile today at the assertion that in 1905 the need of improvement in front axle construction. Both automobile was "almost foolproof," bearing in mind better design and materials were needed. Even those that 5 of the 33 entrants did not even complete the high-priced cars which were equipped with axles of the run. For those days, however, 1,000 miles over coun- tubular type could not traverse 1,200 miles without the try roads was indeed a severe test of a car's endurance; axles becoming bent. The tubular axle was then still it could be traversed far less easily than could twice that made of material of the same quality as had been used distance five or six years later. in bicycle stock and could not stand the strain of coun- The tours in the years which followed were held in try travel. various parts of the country, in the East, the West, The same writer further pointed out that springs, as and the South. That of 1906 was noteworthy for the a rule, were woefully weak spots in the chassis and that defects in the car design to which it pointed, that of if breakage were to be avoided in the future, either the 1907 was marked by a seemingly feverish excitement long semielliptic type must be abandoned, or else better on the part of the contestants and by several accidents, material must be employed.' Tires also were punc- that of 1908 by dissension among the tourists and by tured upon innumerable occasions during this journey protests against the scoring of the award. By 1909, of 1,200 miles, and brakes wore out rapidly whenever the number of entrants (which had been 46 in 1907) a mountainous stretch was encountered. The part of had dwindled to 21. The reason for the decline, given the car which gave the least trouble was the engine; by F. B. Hower, one of the officials, was that the manu- relative to other parts, its performance was striking. facturers "were enjoying too much prosperity. They It possessed enough power to "stress the running gear said, why should we enter this contest when we are to the point of destruction in a few thousand miles of unable to supply the demand now? The advertising country running without itself being injured to any will do us no good.'"" The year 1909 was one in serious extent."' which production, be it noted, had increased about This was in part because of the poor roads of the 00% over the preceding year. It was one of several period. Paved roads in the country districts were virtu- years in which the automobile industry has seen "deal- ally unknown. The dirt and sand roads, while often en- ers come to the factory, stand in line, and beg for cars." r 58 THE AUTOMOBILE INDUSTRY METHODS OF MARKET DISTRIBUTION /59 durable for horse and wagon, were too full of ruts and miles daily.'" In the summer of 1925, an eight- holes to permit high rates of speed with either comfort cylinder Cadillac sedan, under the auspices of American or safety. Even as late as the 1909 Glidden contest, in- Automobile Association officials, left Washington, D. stances of the following character were reported: C. and four and three-quarters days later arrived in After leaving Baraboo, 42 miles out [between Madison and 7 miles were covered in a total La Crosse, Wisconsin] . . . . the road became exceedingly San Francisco. The 3,1 2 sandy . . . . at 79 miles we had to leave the main road and go elapsed time of 4 days, 18 hours, and 3o minutes. The through a grass-grown lane. At the end of this lane came a hill car was, of course, driven day and night and was which was so steep that many contestants doubted whether they equipped so that the passengers might sleep. The fact, could have climbed it Luckily, they only had to descend it.123 however, that the passengers have attested they could sleep comfortably speaks volumes for the present con- A day's run during the 1909 Glidden Tour averaged dition of the country's highways as contrasted with that 175 miles, but it was far from being a comfortable day's of earlier years. Another recent exploit of similar travel. Driven alone for pleasure, and not in a contest, character, two years ago, was the trip of the Army it is doubtful if the ordinary car in the hands of the flyer, Lieutenant Leigh Wade. With a companion, he average owner-driver at that time could make more than crossed the continent in a Packard car without once 75 to roo miles in a day of eight hours' travel. stopping either the engine or the car itself. Gasoline There are available no transcontinental figures for was taken on, and the necessary lubrication performed the year 1909, but figures for the earliest of such trips automatically by the driver pressing a plunger, while on record, made in 1903, may be compared with one the car was in motion. made 21 years later. The contrast between the two Still more recently, several faster transcontinental will illustrate the progress in engine and running gear trips have been made, the two latest ones at this writing construction which has gradually taken place from year being those of a Chrysler six-cylinder car which was to year. driven from San Francisco to New York City in 3 days What seems to have been the first transcontinental and 8 hours, and a Studebaker sedan which still more trip successfully completed was made by a non-profes- recently has made the same trip, but in the reverse sional driver in his own car. Dr. H. N. Jackson, a direction, in 3 days, 53/4 hours. Vermont physician, drove his Winton from San Fran- Racing proper may be said to have begun in this cisco to New York in 63 days.'" Finishing just a few country in 1895, when the Chicago Times-Herald weeks later, a Packard car sent out by the factory made staged a 54-mile contest around the city. This event the same journey in 61 days, averaging about fifty was not exactly, however, a breathless affair. The 54 r 6o THE AUTOMOBILE INDUSTRY METHODS OF MARKET DISTRIBUTION 161 declined. Because of the visible perfection of the mo- tor car, manufacturers need no longer direct any great efforts towards proving the ability of their cars to show speed and to withstand "punishment." Spectacular accomplishments are not longer necessary; good will towards a particular make of car is promoted both by magazine and newspaper advertising and by the daily service which the car gives in the hands of its owners, whose number is now so great that information from them may be obtained quite readily by prospective • yi'40;•• ' - purchasers. ;51.1; 1 • , „ A • Motor Worid UM. H. Mask ♦ Figure 18: Henry Ford passing Alexander Winton in the seventh mile of a so-mile race held at Grosse Point track, Detroit, in soos. miles were covered in 8 hours and 23 minutes, the win- ner being Charles E. Duryea, who alone of the 31 entrants managed to finish. The American Automobile Association, however, held a so-mile road race on Long Island five years later, which is by that organization regarded as the first real American speed contest. The winner, A. L. Riker, did the so miles in 2 hours, minutes. Dirt track, sand beach, and finally speedway racing followed. The first speedway race, run in 1911, was won by Ray Harroun, in a Marmon, which covered the soo miles at an average speed of 74.6 miles an hour, a contrast with the 1900 record which tells its own story. More recent records are considerably higher; detailed tables will be found in Appendix A. Since about 1920, however, both the pub- lic and the manufacturers' interest in racing has greatly

ENTRANCE AND EXIT OF FIRMS, 1903-1926 163 a part in it, is the primary purpose of this chapter and the two chapters which follow. VI Between 1903 and 1926, inclusive, a total of 181 companies engaged in the manufacture of automobiles. That is, the 24 companies found actually to have been THE ENTRANCE AND EXIT OF FIRMS, in production at the beginning of 1903, plus the com- 1903-1926 panies which entered subsequently, made a total of 181 and through the year 1926, had r. The Shifting Personnel of Particular Industries producers who, up to built and sold passenger cars upon a commercial scale. "AT ANY particular moment in any branch of manu- This figure, in comparison with estimates often made, facture," wrote Alfred Marshall, "some businesses will and with one list which has already been published,121 be rising and others falling; some doubting whether to seems very low. I doubt, however, whether the cor- start new factories, others whether to enlarge existing rect number of companies which have actually engaged factories, and to provide themselves with better appli- in automobile production over the period 1903-1926, ances; while others again, feeling themselves behind if it could be ascertained with the utmost accuracy, the age, finding by experience that the equipment and would run much over 200 to 225. The count here internal organization of their factories will hardly made of 181 includes the total number of firms for enable them to sell at current prices and make a profit, which I either have actual production data, or have will be tending to diminish their average output, or good reason to believe actually produced and commer- perhaps breaking down altogether.""° cially sold cars. Undoubtedly there were during these If such is indeed the case in any trade, it will be of years a number of other companies, some of which especial interest to inquire into the conditions of com- probably engaged in fabricating automobiles. Most mercial mortality and survival in an industry during of them, however, were business units, either incor- the first few decades of its existence. In the two and a porated or otherwise, which existed only in the minds half decades of its history which have elapsed, the auto- of the men who organized them. Those which did make mobile industry has grown from the workshop stage cars turned out only a few, often only a sample car or to such maturity as to give it first rank among the man- two. A number were "active," in this sense, for one ufactures of the country. To analyze this amazing year only, or even a shorter time. Any estimate which growth in terms of the rise and fall, the fortunes and included these "paper" firms would run high indeed. misfortunes, of the individual firms which have played To count them might throw light upon the number of 162 164 THE AUTOMOBILE INDUSTRY ENTRANCE AND EXIT OF FIRMS, 1903-1926 165 aspirants to automobile manufacture, but it would number of years during which it or a direct successor hardly afford a picture of the rise and fall of actual continued to produce motor cars constituting essen- manufacturing establishments. In calculating total tially the same line of vehicles. For example, in 1903 entrants and exits, therefore, I have included only such Thomas B. and Company engaged in the man- firms as seem actually to have produced and sold cars ufacture of the "Rambler" automobile. This is counted in a commercial way, firms which sold cars to customers as an entrance into the passenger car field. About other than merely their few principal stockholders or 1912, following the death of Thomas B. Jeffery, the promoters, and which operated plants for more than name of the car was changed to "Jeffery," and the merely two or three weeks or a month. name of the company to The Thomas B. Jeffery Com- Of the 181 companies which, in this strict sense, pany. Then, in 1916, the Jeffery interests sold their engaged in passenger car manufacturing over this 24- properties to a group, headed by James J. Storrow and year period, 137 have retired from the field. Forty-four C. W. Nash, which had just organized the Nash now remain. These figures do not include three com- Motors Company. But the Jeffery establishment was panies which have recently entered and build only taxi- taken over as a going concern; the plant continued to cabs; nor, as will appear shortly, do they include newly operate as before; the distributing organization re- incorporated subsidiaries of old companies.' mained much the same. Though the Jeffery Company, Of these 44, only II have been in business for the as a corporate entity, completely disappeared, this is entire period. Some of the 44 entered only a year or not considered as constituting an "exit" from the field two ago, while many others have been in the field for of automobile manufacturing. The enterprise, an ef- a decade or more. The average (arithmetic mean) fective business at the time of its sale, continued in length of life, for all 181 companies, has been 9.4 years. operation; its ownership merely changed hands. Thus The median length of life has been 7.o years. the Nash car and the Company are not to The distribution of these companies according to the be regarded as newcomers from the point of view of the number of years they have remained in business is rise and fall of firms, but as lineal descendants of the given in Chart 27 on page 169. But before proceeding Rambler car and Thomas B. Jeffery and Company. to an examination of these frequencies, it is doubtless Not only was the number of concerns in the industry advisable to define more exactly what is here meant left unaltered by this change in ownership, but no new by the terms "length of life," "entrance," and "exit." capital was invested, nor old capital withdrawn, as its The length of a concern's life is not taken to mean its direct result. There did occur, to be sure, an expan- continued corporate existence under one name, but the sion of the business under the new regime; but this 166 THE AUTOMOBILE INDUSTRY ENTRANCE AND EXIT OF FIRMS, 1903-1926 167 was financed largely out of earnings and might pos- the consolidation, this is considered as an "exit" from sibly have taken place in some measure anyhow. the field. While in the few instances in which this has There are in this compilation several such cases of taken place no great amount of capital may have been changes in names, either wholly capricious or else the withdrawn, the effect has been, however, to reduce the result of a complete transfer of ownership such as in number of producing units. the instance just cited. In all these cases, such changes In the instance of an already established company are not considered to constitute either "entrances" or merely adding a car to its line, but giving it a new trade "exits." Combinations of existing companies have name, the new "subsidiary" is not treated as a new been similarly treated when the lines of cars manufac- concern, although it may be separately incorporated. tured were continued. Thus in the case of General Thus, for example, Essex Motors, Inc., building the Motors, the Cadillac, Oldsmobile, Oakland, Buick, and Essex car, which was merely a low-priced car produced Chevrolet companies are not regarded as disappearing largely in the Hudson plant and marketed as a part of with their absorption into the holding company, but the Hudson line, is not counted as a new company are counted as continuing in business. General Motors, as of the date of its organization. A different name now, happens actually to own the physical assets of its was given this model primarily as a matter of market- five car manufacturing divisions. But they are still ing strategy. separately operated and are generally still regarded by It remains, in final explanation of the terms "en- the trade as individual manufacturing and marketing trance" and "exit," to mention the participation in units. They did not fail; they merely combined. Nor automobile manufacture by firms already engaged in is General Motors, the holding company that was other manufacturing fields. Often these continued mak- formed in consolidating them, counted as an "en- ing sewing machines, wagons, plows, or locomotives trance." But when , Welch, Scripps-Booth, after entering upon the manufacture of motor vehicles. and (other one-time General Motor's units) In spite of the fact that no new corporation may have were discontinued by the holding company and their been created when this occurred, this should be re- plants liquidated, their disappearances are then counted garded as the "entrance" of a new automobile firm. as "exits" from the industry in the years in which liqui- The withdrawals of such companies from passenger pro- dation took place. duction (and it is an interesting fact that most of them Whenever a concern has been consolidated with, or have withdrawn) are "exits" in the tabulation of rise purchased by, another already existing concern, and and fall, although there may have been no failure of any one line of cars has been discontinued as a result of corporate unit at all. Instances of the various sorts ENTRANCE AND EXIT OF FIRMS, 1903-1926 169 168 THE AUTOMOBILE INDUSTRY 50 above mentioned do not, however, predominate among the concerns here tabulated; and except for such cases the term "entrance" means the organization and actual operation of a new concern; "exit" means failure and, 40 ordinarily, liquidation; "length of life" means the elapsed time between the two.

2. The Length of Life of Companies and the Causes of U) E 30 Failure ro E It will be seen from Chart 27 that 48 of the 181 0 4- companies have enjoyed a life of only 1, 2, or at most 0 3 years. A life of 4 to 6 years is found for 4o other com- panies, while a duration of 7 to 9 years characterizes 20 26 other firms. The falling curve of the chart indicates that as the length of life increases, the number of com- panies enjoying it steadily shrinks. Only eight com- panies have remained in business 22 to 24 years, and 10 only five have survived 28 to 3o years. This distribution, expressed in terms of certain per- centages, gives the following frequencies: 0 - 24 29-27 28-30 28% have lasted 3 years or less 1-3 4 6 7-9 10-12 13-15 16-18 19 21 22 49% have lasted 6 years or less Length of Life in Years 36% have lasted to years or more Chart 27: Frequency distribution of the lengths of life of 18i passenger car 19% have lasted 16 years or more manufacturing firms, from the beginning of 1895 to the beginning of 1927. Put otherwise, the median length of life is 7 years; the pursuits, although something will be said shortly as to first quartile' is 3; the third quartile, 13. certain general percentages of failure which have been How, it may be asked, do these lengths of life com- compiled by R. G. Dun and Company for all businesses pare with those for firms in other industries? Unfor- taken together. But, even in the absence of satisfac- tunately, there are no comprehensive figures available tory comparable data for other separate industries, it for other important individual trades or manufacturing '70 THE AUTOMOBILE INDUSTRY ENTRANCE AND EXIT OF FIRMS, 1903-1926 17T the product has always existed the danger of making them too readily or too drastically. For if insufficient change of practice means stagnation, so also do fre- quent and complete shifts of production policy spell manufacturing and marketing confusion. Similarly, in the automobile industry, a delicate bal- ance had always (and still has) to be struck between a policy of making too few models or "chassis types" to satisfy the demands of the market and one of simul- taneously making too many types to permit a suffi- ciently economical production and a satisfactory con-

Figure 19: SOME PROUD TRADE-MARKS OF 1904. trol over manufacturing processes. As in other trades, the dealer ordinarily desires a complete, or fairly com- seems evident that the mortality in automobile manu- plete, line. He welcomes the production of an addi- facture is high; only 33% of the firms which actually tional model which will sell in another price class, for started at any time during this 24-year period still then he can sell against the competition of a greater survive. number of other makes of cars. But the experienced Upon second thought, however, that there have been manufacturer knows that by the development of stan- relatively so many automotive failures is not so sur- dard practice in plant operation, the more readily at- prising. One would expect the hazards to be greater tainable through a policy of concentration upon one in a new industry, especially one making a complex or two popular chassis types, he can markedly lower fabricated product, subject to constant change and im- factory costs. Thus viewed, the greatest degree of provement in design and construction. This recurrent economy in production at times seems to be incom- necessity of making innovations both in the character patible with the fullest measure of success in market of the product and in methods of manufacture, if the competition. But since a firm's net earnings are always place of a firm in the industry is to be maintained, a result (or, in mathematical language, a function) of probably serves to explain in large measure the com- both sales volume and production costs, the most profit- plete disappearance of many automotive names that 4ble policy for a firm to pursue is seldom to increase were once highly respected. Coupled with this impera- sales alone, or to lower production costs alone, but tive necessity of making alterations in the character of always to find the proper point of balance between 172 THE AUTOMOBILE INDUSTRY ENTRANCE AND EXIT OF FIRMS, 1903-1926 173

these two variables. This point, for any particular sound it might seem, necessarily obtain either for all product at any given time, being largely a matter of companies or for all periods. The trend of the last guesswork, of shrewd judgment coupled with trial and few years seems in the direction of increasing the line. error, some firms have tended towards the one pole, Manifestly, the conditions of market competition here some towards the other. Willys-Overland throughout constantly interact with, and significantly influence, most of its history, Studebaker in recent years, and considerations of production. Buick for a considerable time, furnish examples of con- It is clear, however, that in past years those firms cerns which have attempted to meet the demand of which have leaned too far one way or the other in the dealer for a comparatively large line of products. these two matters of supplying the dealer with either On the other hand, Ford, Dodge, and Hudson offer too large or too small a number of models, or in chang- three admirable illustrations of firms which, over ing the design and construction of cars either too dras- periods running from 8 to 16 years each, not only made tically or insufficiently at certain intervals, have fallen very slight changes in design from year to year, but by the wayside. It is not, of course, here meant to also leaned strongly in the direction of simplifying pro- imply that errors of judgment in connection with these duction during any given period by concentrating upon several policies have been the only causes of business a relatively narrow line of products. failure in this and other industries. There can be little The compromise policy which Hudson initiated in doubt, however, that these have acted as important 1919 and which several other firms have adopted, causes. Financial incompetence, lack of selling ability, namely, that of producing a second car under another pure administrative ineptitude, all have counted here, trade name at the hands of a subsidiary company, will as elsewhere. But, allowing for all such individual not here be discussed. In general, the extent to which it ineptitudes in particular cases, the high general level pays to diversify the line, even when another name is of failures in automobile manufacture remains in large given the new car, depends upon the same considera- measure due to the great difficulties present in striking tions which obtain if the new model is not thus differ- a proper balance between sales and manufacturing entiated. This whole matter, however, raises some ex- policies. tremely interesting and significant questions of general Likewise, the fact that the automobile industry has business policy which I hope to consider at length in emphatically been one of "increasing return" wherein another volume. The proper number of models for any increase of output brings with it, within very broad a firm to make is not, of course, completely settled, nor limits, a lowering of unit costs"' may also account in would any standard which might be set up, however large part for the presence of this high rate of mor- 174 THE AUTOMOBILE INDUSTRY ENTRANCE AND EXIT OF FIRMS, 1903-1926 175 tality. In particular, the great savings made possible A glance at Chart 28 will show that the answer is by internal plant economies place a premium upon distinctly in the affirmative. The curves of this chart large-scale production. The manufacturer who can ma- show the absolute number of entrances into and exits terially lower his costs by the development of stand- from the industry during each year from 1903 to 1926. ard practice in manufacturing operations, possibly The table below the chart gives the supporting data through concentration upon one or two popular chassis and, in addition, the number of firms left in business types, is often enabled to offer his product in a lower at the end of each year or at the very beginning of the price class than the one in which he has been previously year following. The solid curve represents entrances; selling; and may thus drive many of the producers al- the broken one, exits. ready in that price class to cover. Some of them may In tracing the relation between these two curves, it succeed in remaining there despite the newly offered will be noted that they seldom rise or fall together in competition, but others will have to attempt to serve a the same year. That is, they correlate inversely. A lower price class of buyers. If they cannot do this year in which many firms entered is, as might be ex- successfully, they are then driven out of business en- pected, seldom a year in which many failures occurred. tirely. The causes of any particular failure may some- Conversely, in those years marked by a large number times be understood through an analysis of the internal of failures, relatively few concerns essayed to enter management factors involved in the particular enter- the industry. For example, in 1909, with 18 entrances, prise, but frequently they can be arrived at adequately there, is but 1 failure, while in 1910, with 18 failures, only through study of the practices and policies of com- there is only I entrance. In 1924 also, there are 15 peting firms as well. The rapid march of events in the exits and only 2 entrances. automobile industry simply left behind those firms This inverse correlation is, as the chart indicates, which could not keep in step. far from perfect. But in the main the figures justify the not startling conclusion that new firms choose 3. Failures Year by Year "good years" in which to enter business, while "bad So much as to the causes underlying certain broad years" dissuade those with intentions of doing so. factors in automotive failures throughout the period Certainly the 18 failures of 1910 served to cast an 1903-1926 in general. What, now, of the specific course effectual damper on entrances in 1910-1911, and again, dis- of failures from year to year? Both in absolute num- seemingly, the large casualties of 1922-1924 ber and in the proportion of failures, has there been any couraged attempts to start in those years. The great marked variation? number of companies which entered the field in 1912- 1 76 THE AUTOMOBILE INDUSTRY ENTRANCE AND EXIT OF FIRMS, 1903-1926 277 Number of Fir ms 27 22 25 20 Entrances -Automobile Failures 10 ----Exits --- General Business Failures .4 20 16 .12 V 14 r ls N 15 12 •

1 0

10 8 ; 6

4 5

2 '1 ••••••••-■.... 0 0 1004- '06 10 '12 '14 '16 '18 '20 '22 '24 '26 1904 'Os '08 '10 '12 '14 '16 '18 '20 '22 '24 '26

No. of No. of No. Firms No. of No. of No. Firms PERCENTAGE OF FAILURES IN PERCENTAGE OF FAILURES IN Year Entrances Exits Remaining Year Entrances Exits Remaining PASSENGER AUTOMOBILE ALL MANUFACTURING, TRADING AND MANUFACTURING COMMERCIAL PURSUITS 1902 12 1915 10 6 75 1903 13 I 24 1916 6 7 74 1904 12 1 35 1917 8 6 76 Per Per Per Per Per Per 1905 5 2 38 1918 6 71 Year Cent Year Cent Year Cent Year Cent Year Cent Year Cent 1906 6 2919 43 to' CO

77 0

1907 x911 0 0 1 0 44 1920 12 84 1903 4 1911 4 1919 1919 0.4

0 1920 0.5 1908 10 1912 0 1 72 1921 5 1 88 1904 3 1912 12 1920

M 1.0 1909 1913 0 1921 18 1 69 1922 1 9 83 1905 5 x913 1e. 1921

1920 r I. 0 1922 I.2 18 52 1923 1 2 4 70 1906 2 1914 9 1922 1914 0 0 1- 0 OD 1911 9 1915 0923 0.9 3 2 53 1924 2 15 57 1907 0 1915 7 1923 4

1912 0 C /924 1.0 12 S 57 1925 0 8 1908 4 1926 9 1924 1916

49 O ' 1913 20 7 70 1026 1 6 2909 x 1917 7 1925 0917 0 1925 1.0 44 0

1914 8 71 /910 26 1918 7 x926 1918 1926 1.0

Chart 28 Number of firms entering and leaving the passenger automobile industry, 1903-1926. Chart 29: Percentage of failures (exits) in automobile manufacturing com- pared with failures in general business, 1903-1926. 1913 is probably due to the launching of many plans itself is difficult to say. In some measure it may rep- which were postponed in 1910-1911. What caused the resent a recovery from the poor conditions of general great number of entrances in the period of 1908-1909 business in 1907-1908; in some measure, a mere rush- ENTRANCE AND EXIT OF FIRMS, 1903-1926 179 178 THE AUTOMOBILE INDUSTRY ing of entrepreneurs into the field, confident that the for other individual industries, there are available cer- automobile had definitely "arrived" and that quick tain annual figures of general business mortality; first, profits were readily obtainable. The number of failures for all business concerns in the United States, secondly, a year later (1910) chanced to be identical with the for all manufacturing firms in the United States in number of entrances in 1909. certain years. Messrs. R. G. Dun and Company pre- Turn now to Chart 29, which shows not the absolute sent, in the various January issues of their Review, a number but the proportion of companies which failed record of general business insolvencies running over a annually. The number of automotive exits in each period of 6o years and calculate the proportions for the year is here expressed as a percentage of the firms in period 1903-1926 for all concerns to be as shown in the business at the beginning of the year (left at the close following table: of the year preceding) plus those which entered during Per Per the year in question. Thus the figures to which exits Year Cent Year Cent are here related are somewhat larger than the figures 1903 09 1915 10 ch 9 1916 10 for "number of firms remaining at end of year" given 1904 1905 O8 1917 O8 in Chart 28. As in Chart 28, the data plotted are 1906 o 7 1918 o.6 1907 o 8 1919 0 4 presented in tabular form below the chart. 1908 I x 192o o 5 Again, the great fluctuation in the percentage of 1909 0.8 1921 e 1910 o 8 1922 12 automobile failures is apparent. Sometimes as low as 1911 O8 1923 o 9 o 9 1924 I 0 2%, 1%, or even zero, the solid line of Chart 29 rises 1912 1913 09 1925 1 0 several times ab4ve o%, and in three of the years 1914 1 0 1926 I 0 shown, to 15% or more. To some extent, as in 192 2- 1924, this is the result of the fluctuation of general Thus in no year did failures much exceed 1 % of all business; but in large measure it is due to developments concerns engaged in manufacturing, trading, and other in the automobile industry itself—developments which commercial pursuits. For manufacturing alone, Dun have already been touched upon in earlier chapters, and Company do not give percentage figures, but they but which will be further discussed shortly. list the absolute number of failures in all manufacturing These percentages of failure, it should now be re- fields for the years 1910-1926. Such of these figures marked are noticeably greater than those for business as can be related to the total number of establishments failure in general. Although, as previously stated, given for certain years in the Census of Manufactures' there exist to my knowledge no comprehensive figures are as follows:

18o THE AUTOMOBILE INDUSTRY ENTRANCE AND EXIT OF FIRMS, 1903-1926 181 the succeeding period, 1908-1912, offers a fruitful field Number of Number of for analysis. If we ignore the 26% peak in the single Year Establishments Failures Percent year 191o, for which special factors account,'" a ques- 1914 2 75•701 5,113 1.9 1919 ,,,,,,,,,,, 290,105 3,82 7 1.3 tion first arises concerning the marked general increase 1921 T96,267 4,495 2.2 in the percentage of exits during the year 1907-1912. This rise seems to be due both to the rapidly chang- These figures of approximately 2%, I% and 2% ing techniques of design and production"" and to a are to be compared with figures for automobile manu- great "tapering off" in the demand for high-priced facturing, for the same years, of 7%, 5% and 170 . cars.'" Between 1907 and 191o, single- and two- The last automobile manufacturing figure (1% for cylinder cars were practically abandoned. Four-cylin- 192 1 ), however, was abnormally low; it rose to ten der machines were made, and many manufacturers times as much the year following, and still higher the found them more difficult to build. The transition to year after that. higher powers and weights involved the necessity of re- While the automobile "failure" figures here discussed designing not only the engine, but often also the axles, are really "exits" and not in all cases insolvencies, the transmission, and the rest of the running gear."° If, for insolvency rate is clearly much higher than in general example, a. firm attempted to utilize on a heavier model business. Of the 137 firms which have retired from the same rear axle it had employed on a lighter, the re- automobile manufacture, at least 65, it has been ascer- sults were often disastrous. The car would come to tained, actually went into bankruptcy. The list is given have a bad reputation; it was known to consumers, and in detail in Appendix C, pages 377-382. especially to dealers, as a "lemon," or, perhaps at best, as a good car with poor rear axle shafts or axle housing. 4. Causes of Changing Rates of Failure If any great quantity of such cars had been shipped, How, now, account for the great fluctuations in the "making good" in a market sense often involved the year-to-year percentage of failures over the period indi- prompt replacement, free of charge, of all parts already cated by Chart 29? For the slight fall in the percentage in consumers' hands. Unless this was done, both dealer of failures from 1903 to 1907, it may merely be sug- morale and consumer demand fell off. gested that the relatively small number of companies On the other hand, extensive redesigning of models in the field, together with an unusual prosperity en- meant incurring heavy expenses for new dies, jigs, joyed by the new industry in 1903,182 made the condi- templets, or even new machinery. It might also involve tions of existence fairly easy during those years. But losses on certain items of inventory. Nowhere in the 182 THE AUTOMOBILE INDUSTRY ENTRANCE AND EXIT OF FIRMS, 1903-1926 183

industrial field was the attainment of a nice balance getting every kind of thing in sight, playing safe all along the between means and ends more necessary or more diffi- line."187 cult than in automobile manufacture with its highly Conditions such as these probably explain the rising unstable conditions. What to make and how to make proportion of failures between 1907-1912. Constant it, when to change and how much to change, to which uncertainty as to what the progress of the industrial class of consumer the product is to go and how to get arts would next bring forth was coupled with doubt it there, when to be bold and when to be conservative as to the extent of the market and the preference of the —these were indeed anxious problems calling for man- public for particular types of vehicle. Not only did ufacturing, sales, and financial ability of the highest the demand for high-priced cars shrink relatively dur- caliber. And, as in all business enterprise, chance has ing these years; for a time it fell off absolutely as well. played a part. It is easy now to see the revolution The extraordinary exit figure in 1910, of 26% of all in the demand for cars of several price classes which firms engaged in the field, is probably due, above all, occurred after about 1907; but the manufacturer who to the absolute falling off in the demand for high-priced obstinately stuck to their manufacture in 1909 had no cars which occurred in that year. Many manufacturers chart to warn him. In retrospect, the lack of "pro- who could not, or did not, successfully adapt their gressiveness" is obvious in those concerns which re- facilities to the production of lighter-weight, four- tained a two-cycle engine or a chain drive; but the cylinder vehicles during that and the two years which shrewdest men in the industry were often in doubt as immediately followed, were obliged to retire from to which course they ought to pursue. Even so clear- business. They were, in Marshall's words, the firms visioned and brilliant a leader as W. C. Durant at that already "feeling themselves behind the age." The one time stated that one reason for amalgamating, into the producer who preeminently was ahead of his time in General Motors Company in 1909-1910, concerns mak- this respect was Ford. His company made a heavy ing so many widely varying products was that there was 6-cylinder machine in 1907, but discontinued it in the no certainty as to what would happen: following year and ever since, until 1927, stuck to the "They say I shouldn't have bought Cartercar," he said. "Well, now ubiquitous light car introduced in 1908. how was anyone to know that Cartercar wasn't to be the thing? Following the year 1912, the percentage of failures It had the friction drive and no other car had it. How could I fell almost steadily. It had been 12% in 1912; it tell what these engineers would say next? Maybe friction drive 7% in 1918, 6% in 1920, i % in 1921. How would be the thing. And then there's Elmore, with its two-cycle became engine. That's the kind they were using on motor boats; maybe explain a decline as great as had been the general two-cycles were going to be the thing for automobiles. I was for ascent during the period 1907-1912? 184 THE AUTOMOBILE INDUSTRY ENTRANCE AND EXIT OF FIRMS, 1903-1926 185

In the first place, there was an increased ease of however, conditions such as these disappeared. Not manufacturing. Not only were fundamental changes only were the specifications of fabricated parts stand- in design less frequent in this period, but the general ardized, but those of materials as well. The steel growth of the industry had made the purchase and maker was no longer "enabled to get around a bad employment of good materials and standard parts a corner" by unloading an inferior lot of material upon fairly simple matter. The establishment in 1906 of the an unwary automobile manufacturer ;142 he had to meet Mechanical Branch of the Association of Licensed the stringent engineering specifications available to all Automobile Manufacturers' marked the beginning of car designers and purchasing agents in the Society of a program of general technical research. The move- Automotive Engineer's Handbook. ment towards the standardization of materials and Not only did the purchase of standardized parts and parts received a fresh impetus in 1910 when, upon the materials become much easier between 1913 and 1921, breaking up of the Association of Licensed Automobile but their cost became much lower. Production on a Manufacturers, the Standards Committee of the So- steadily growing scale resulted in both external and ciety of Automotive Engineers was formed. "The internal economies; lower cost enabled manufacturers apparently easy path [of standardization] was strewn to sell their products at lower relative prices, and each with pitfalls, which it took years of study and con- lowering of price increased the quantity sold. The tinuous effort to learn to overcome. All the records number of entrances into the industry between 1913 of the Mechanical Branch were turned over to the and 1921 could greatly exceed the number of exits"' Society, thus combining the resources of both organi- and the proportion of failures could be comparatively zations and advancing the work at one step as could low, because most companies in the period produced not otherwise have been done during a period of inexpensive cars, and the market for low-priced cars years.'"" kept on expanding at a remarkable rate. Some details of this procedure have been mentioned The shift in number of producers serving these sev- in an earlier chapter,'" but its importance for the sur- eral markets, the low-, medium-, and high-priced car, vival of many firms, especially the small ones, warrants is shown in Chart 30. The total figures of these fre- further discussion. In 1907-1911, because of the ab- quency distributions are not, however, to be compared sence of standardization (and thus the lack of inter- with the total numbers of companies in business each changeability) in carburetors or ignition apparatus, year as shown in preceding charts and tables, since some "major alterations in engine construction were required producers manufactured cars of several sizes and prices. "41 to change sources of supply. Subsequent to 1912, A further cause of the falling proportion of failures 186 THE AUTOMOBILE INDUSTRY ENTRANCE AND EXIT OF FIRMS, 1903-1926 187

Number of Companies bers of the working class received higher money wages 25 than ever before. In accordance with the common dif- 20 1907 ficulty of distinguishing real purchasing power from money income, many workers spent their wages more 10 freely than ever; and the purchase of automobiles was a popular form of expenditure. But with the crisis of 1920 and the depression of Under 4675 *575 11375 11775 42215 32775 43775 34775 675 -1575 -11573 -41775 -32275-32775 -113773 -44175 &-Over 19 2 1-1922 came a sharp reversal of general business 25 conditions. Twenty-two firms had entered the industry 20 1913 in 1919-1920; 23 withdrew in 1922-1923. Fifteen 15 more exits were made in 1924. The proportion of 10 failures steadily rose from r % in 1921 to 21% in 1924. 5 Since 1924, however, failures have declined. Not a as yet have the forebodings which the 1924 failure rate Under 3675 357.5 $13/5 11115 12275 1 2775 33775 14175 3 175 175 -175 .5 -31775 -321.73 12115 -$377.7 -4 4775 1-Over once suggested been realized. That rate, combined 30 with the fact that 1924 was the first year, other than 1916 25 one of war or of deep general business depression, in 20 which the total number of automobiles produced (in 15 all price classes taken together) showed an absolute 10 decrease from that of the year immediately preceding, raised some doubts, a year or two ago, as to the safety of a number of firms in 1925 and 1926. But such Under 3 675 1875 11373 31775 32273 12113 33115 34775 1 675 -1 575 -11575 -11775 -3 221 5-5 2115 -13115 -34775 C.- Over grave doubts the years 1925 and 1926 soon dispelled.

Chart 3o: Frequency distributions of number of companies serving different The 1925 production figure was 3,855,000 cars (if auto- markets, 1907, 1913, 1916. mobile trucks are included, the number of motor between '913 and 1921 probably lies in the fact that vehicles produced totaled 4,300,000). This represented this period was one of rapidly rising general prices. a slight increase over both the 1924 figure and the Except for the year 1914 and a part of 1915, the former high-water mark of 3,650,000 cars in 1923. country enjoyed general "prosperity"; money condi- The 1926 figures stood even somewhat higher still- tions were easy, full employment prevailed, large num- 3,900,000 cars, or 4,400,000 cars and trucks together. x88 THE AUTOMOBILE INDUSTRY ENTRANCE AND EXIT OF FIRMS, 1903-1926 189 (These figures include the Canadian production, which Number of Years Engaged I comes almost exclusively from American-owned fac- Year 1 2 3 4- 5 6 7 8 9 10 I 1 12 13 14 15 16 17 18 19 20 21 22 23 28 29 30 ____ tories.) In consequence, failures in 1925 fell from the Ho r 21% level of 1924 to but 14% in 1925, and to 12% 'gat I in 1926. 1005 5. Average Life of Firms Leaving the Industry 1906 1907 There remains one more tabulation. The length of 1908 I 1 life has been computed for all firms throughout the period 1903-1926. A final question which this compu- 1900 1 tation ought to answer is: Did the average life of those 1910 8 3 1 1 2 firms which have each year failed become altered over 1911 1 1 this period? The figures on the average length of life 1912 3 1 I I I 1 presented above (9.4 years, arithmetic mean; 7.o 1913 1 2 I I 1 years, median) were for the entire group of 181 com- 1914 3 I 2 1 panies which engaged in business between 1903 and 1915 1 2 1 I 1926. Thus there were included those firms which re- 1918 I 2 3 main in business at present. If, however, these, the 1917 3 I 44 companies now remaining in business, be eliminated, 1918 I I 1 I 2 the averages that hold for the 137 firms which over 1919 1 I a 24-year period have come and gone are slightly dif- 1920 ferent: the arithmetic mean is 7.2 years, the median, 1921 I 5.o years. 1922 1 3 1 1 1 2

The distribution of the mortalities of each year, 1923 I 2 1 I I 3 I 1 2 based upon the individual lengths of life of the out- 1924 2 4 3 1 1 I 2 I 1 going companies, is shown in Table r on the opposite 1925 2 I 1 1 1 1 page. The averages for each year, for quicker examina- 1926 I I I I I 1 tion, are shown in Chart 31. Totals 9 23 15 13 11 12 6 9 5 4 6 2 2 2 2 2 2 1 1 3 4- Both these arithmetic means and the median yearly Table 1: Frequency distribution of firms reCring from passenger car manu- figures for the life of outgoing firms fluctuated first facture in each year, 1903-1926, according to the number of years they were engaged in the industry. 190 THE AUTOMOBILE INDUSTRY ENTRANCE AND EXIT OF FIRMS, 1903-1926 igot Average Ore in Years

12 percentage of failures from 1912 to 1920: increased ease in manufacturing and great expansion of the low- A-Arithmetic Mean ■ 10 e-fled an priced car market, with a growing recognition on the

9 part of many companies that this was the profitable A market. It was undoubtedly the stabilization in con- 8

7 ditions of productive technique which chiefly caused this rise in length of life. Had there prevailed the 6 same necessity for frequent radical changes in design 3 and construction and the same difficulties in the way of making these required alterations as existed in the 3

a period before 1910-1912, many concerns would have been forced out sooner than they were.

0 What the future will bring in the way of exits from 1903 04 03 '00 07'01509 '10 11 '12 13 '14 13 '16 17 19 '19'20 '21 2223 24 '25 26 the field, now that the conditions of production have Chart 31: Average life of firms leaving the automobile industry in each become relatively stabilized, will depend primarily year, 1903-1926. (In 1907, none left.) upon the demands of the market. There is, of course, one way and then the other between 1903 and 1916. an interrelation between the prices of products and the Neither figure had risen above 7.5 years by 1916, and ability of producers to offer given supplies of goods. both averages stood then about as they had in 1906, at But while the interaction of supply and demand may 4 years as compared with 3.4 years in the case of the be held to determine the "normal" price of a competi- earlier year. But between 1916 and 1924 a marked and tive product over a long period, this "normal" or "long- almost steady rise in both figures occurred, until by run" price, in the economist's sense of the term, is an 1926 the median stood at 11.5 years, while the arithme- elusive if not wholly nonexistent category in a rapidly tic mean (affected by the exit of several extremely old developing industry where constant change is the order companies, each of which had lasted over 20 years) of the march. In automobile manufacture before about reached the slightly higher figure of 11.8 years. The 1912, it was, speaking loosely, easier to sell cars than reasons for the general increase of the median figure, to make them. Since 1912, because of great technical which is not affected by these extreme cases, during strides, it has become much easier to make them. Now, the period subsequent to 1916 are doubtless the same with the annual aggregate demand for cars growing at as those which accounted for the marked decline in the a less rapid rate than in former years, it may shortly

192 THE AUTOMOBILE INDUSTRY prove to be easier to make automobiles than to sell them. What is here meant, however, should be made VII perfectly dear. Cessation of demand is in no way indicated and is, indeed, utterly unthinkable. But an apparent tendency towards stabilization, as evidenced THE RISE AND FALL OF FIRMS, 1903-1926 by a marked tapering off of the curve showing the rate of production increase, is to be recognized. This means 1. The Relative Movements of Specific Firms merely that the industry has come to maturity. How THE last chapter gave an outline of the rise and fall much higher its annual output (which, be it repeated, of all firms over the period 1903-1926. Figures were is still growing) can climb still remains an unsettled presented for both total and year-by-year entrances question. It will be touched upon briefly in the con- into, and withdrawals from, the industry. The purpose cluding chapter. of the present chapter is somewhat different. Not fail- ures in general, but the rise and fall of individual producers will be discussed; not mortality rates for the industry as a whole, but the progress of particular firms, each compared with the other, will be traced. This analysis of the rise and fall of companies in terms of their comparative leadership in the industry divides into two parts. The first portion, which discusses r in some detail the period 1903-1916, constitutes an ex- amination of each company's history in order to see whether or not that firm ever was counted among the first 25% of all firms in the industry and, whether or not it could at one time be so counted, to ascertain what its fate was subsequently. The second part of the study undertakes a still more detailed examination of the exact positions of a smaller group of producers— those firms which have, at one time or another, defini- tively stood in the very forefront of the industry. The

193 THE AUTOMOBILE INDUSTRY 194 RISE AND FALL OF FIRMS, 1903-1926 195 precise nature of these two investigations will be made of existence; how many at one time standing above the dear in the discussions which follow. first quartile sooner or later dropped to the interquartile 2. Movements between Production Groups, 1903-1916 range (the middle group), or even lower; or how many that were for a time below the third quartile (in the To trace the movements of specific firms in a com- lowest group) ever rose to positions of leadership (the prehensive manner, all companies engaged in the man- highest group). ufacture of passenger cars at any time between 1903 The reasons for limiting the firms included in this and 1916 are ranked for every year according to the count to those which have enjoyed a five-year life or number of cars which each produced. The largest more are fairly obvious. A firm which is in business but producer in any one year heads the list for that year, one year exhibits no rise or fall at all; while one that the others follow in order of rank. Thus arrayed, the lasts but one or two years may evidence by its position list for each year is divided into three sections. The nothing more than birth and death pangs. It rarely, if first or top grouping contains the highest one-fourth ever, rises to any substantial position, and its history of the companies listed. The second or middle group- belongs to the subject of entrances and exits, consid- ing then constitutes the central half, or the middle ered in the preceding chapter, rather than to that of 50%, of all the companies arrayed in that year, accord- rise and fall in the sense now meant. In ascertaining the ing to their positions in production. The third or bot- movement of each firm, moreover, neither the first tom grouping includes the lowest one-fourth of the roll year's production figure nor the figures of the last two of firms for the year. In the language of statistics, the years of its existence (if it went out of business dur- first and third quartiles, and thus the interquartile ing the period here considered) have been counted. ranges, are found for each series. This latter procedure has been followed because it often These division points ascertained, all firms which en- took from 12 to 18 months after the occurrence of a joyed a minimum life of five years or over during the crisis in a concern's life, or after a decision to retire, period 1903-1916 may be specifically classified accord- finally to wind up affairs. Thus, five years has seemed ing to their positions above, below, or between these to be the minimum length of life which could well be points in various years. If in such a classification the established for the purpose in mind. positions of specific firms are followed, the results will There were 63 firms which enjoyed this minimum life indicate how many of the firms remained in the first between 1903 and 1916. Many of these firms, of course, division, or above the first quartile, for each year had lives much longer than this; a number lasted 8 throughout the entire period of their five years or more years or more, and an occasional one lasted 12 or 14. x96 THE AUTOMOBILE INDUSTRY RISE AND FALL OF FIRMS, 1903-1926 197 A number continued in business beyond 1916, and many of these still remain in the field. The average life which the 63 firms had enjoyed up to and including 1916 was: arithmetic mean, 10.8 years; median, TO years. Over this period of 14 years, then, we may note the rise and fall of these companies as depicted in Chart 32. 555 From the preceding discussion, the construction of this FIRST QUARTILE rather unconventional-looking diagram should be fairly clear. Its top "box" or rectangle represents the group of firms standing above the first quartile, occupying po- sitions of leadership; the bottom "bog," those standing below the third quartile, in the lowest 'bositions; while the middle "box" represents the interquartile range, et St 5: The 63 curves, or lines, of the diagram represent the tJ 63 companies. The diagram covers no particular year rr between 1903 and 1916, but the period in general; those several curves which run straight across the diagram, for example, lines a and b in the top box, indicate that the companies they represent never changed their posi- tions as between the upper, lower, and middle groupings throughout the entire period. Those curves which move, however, from one rectangle into another—which cross either or both of the two heavy bands de- noting the first and third quartiles—indicate that the companies they represent, at one time or another, shifted their positions to the locations indicated, remain- ing in the new positions either temporarily or perma- nently. The companies represented by curves h and 1, lei for example, which start in the top box of the diagram, iiL at one time during the period 1903-1916 produced suf- Chart 32: Movement of 63 automobile firms over the period roo3-1016. 198 THE AUTOMOBILE INDUSTRY RISE AND FALL OF FIRMS, 1903-1926 199 ficient automobiles to place each of them among the firms which have at any time stood above the first highest fourth of the companies in the industry. But quartile is in general quite small. Only in years prior at some later time both these companies dropped out to 1906 did any large proportion of leading producers of this class. undergo vicissitude.' That these 7 firms retained their Examine now the movements of the 63 companies as positions would seem to indicate that leadership in a shown in this diagram. Nearly half of them maintained new industry can be maintained, for 14 years at least, their position within their respective ranges throughout by a large proportion of the companies in the vanguard. the entire period: 28 curves run straight across the dia- But leadership can also easily be lost. Nine other gram. It should, of course, be clear that the parallelism producers, each of whom in some year or other stood of those curves which move together does not indicate proudly in the first division, fell, in some other year or parallelism of individual firms relative to one another years, below it (curves It to p). Seven of them sank within any one group or rectangle, but only that the to the middle group and there remained (curves It to n). firms represented remained in similar positions with re- One of them fell to this middle division and later rose spect to being above, below, or between quartiles. again to leadership (curve o). The ninth one remained Somewhat over half the total number, or 35 com- in the middle division for a time, then dropped per- panies, in some year either rose or fell. Five of these manently to the bottom group below the third quartile. 35 rose and remained permanently on the high level Conversely, an almost identical number of producers, (curves q, r, ccc, ddd, Nine fell and remained 8 to be exact, who were once members of the middle permanently on the lower level (curves k to n, aaa, group, managed to rise for a time to positions in the bbb). Of the other 21, all save one oscillated; they first division, but before the dose of the period rejoined either rose and then fell again, or else fell, then rose the interquartile range (curves s to z). Seven other again. The one which did not oscillate dropped twice members of this middle group fell at one time or another —it fell steadily (curve p) . to positions below the third quartile; but in time they Now as to the detail; for here, as often, it is from an all returned to the range from which they came (curves analysis of details that conclusions best come. tt to zz). There were 7 firms which, so long as they remained in business, held in every year their positions in the 3. Summary of Movements from Group to Group; Ex- first division (curves a to g). Not all these firms, it is ceptional Cases. true, continued in business throughout the whole of the The outstanding features of the progress of these period, but the percentage of withdrawals among the firms between divisions may be summarized as follows: 200 THE AUTOMOBILE INDUSTRY RISE AND FALL OF FIRMS, 1903-1926 201 Movements out of the middle range, made in either an priced line and purchased the business of another auto- upward or a downward direction, are decidedly tem- mobile firm, a successful maker of low-priced cars. With porary—they tend in time to reverse themselves; simi- the excellent manufacturing organization thus acquired, larly, although to a lesser extent, upward movements the company had little difficulty in reaping the great from the bottom group into the middle group tend also gains attendant, after 1912, upon cultivation of the to be temporary; but downward movements out of the market for low-priced automobiles. first group tend to be permanent. To put it more vig- The second firm which successfully lifted itself out orously, mediocrity, once surmounted, is soon reverted of a position below the third quartile (curve ddd) did to; incompetence surmounted is also soon reverted to; so chiefly because of engineering skill. It, too, made an but leadership, once lost, is hardly ever seized again. expensive car, but about 1907 it pioneered in the com- That only one of the 9 firms leaving their positions in bination of several features which other makers were the first division ever returned is somewhat startling. soon to follow and which only comparatively re- A further feature connected with the rise and fall of cently,145 among large cars, have been generally dis- these firms is that most of the movement has been be- carded. This company introduced the first arm with tween immediately adjacent groups; that is, from the a six-cylinder engine, four-speed selective type sliding top division (or from the bottom division) into the mid- gear transmission, and double ignition system employ- dle division or vice versa; not often from bottom to top, ing a high-tension magneto. It was not only a well de- or from top to bottom. There are only 3 instances signed but an exceptionally well constructed machine, among all 63 companies in which movements of this and immediately came into public favor throughout the more extreme type have occurred (curves p, ccc, ddd). country. These three firms have been investigated in order to The third exceptional instance (curve p), also of a ascertain what special circumstances, if any, were high-priced machine, is that of a firm which fell from present. above the first quartile to below the third. This de- The two cases in which there have occurred climbs cline involved a gradual loss of sales over a period of from below the third quartile to above the first quartile more than half a dozen years. The firm remained in are quite different in character. One (curve ccc) is that business for 13 years all told. Its cars, especially in the of a wagon works which engaged for some years in the latter years of its history, were handsome vehicles and production of automobiles, making a high-priced car. enjoyed a good reputation. Except for the fact that During the period here under consideration, this com- the factory was located in New England, where condi- pany, large and well financed, discontinued its high- tions do not seem generally to have been favorable for RISE AND FALL OF FIRMS, 1903-1926 203 202 THE AUTOMOBILE INDUSTRY

automobile manufacture, no good explanation for its 5 decline has yet been found. It continued throughout 1 its life to make high-priced cars—one model was ex- ceptionally high-priced—and this may have contributed to its difficulties after 1911-1912, the market for high- priced cars, as has elsewhere been pointed out, having

become temporarily "saturated" between 1912 and FIRST QUARTILE 1916. The analysis of the movement of these 63 firms may be concluded by the following summary figures:

Percentage CC bb of Total 85 Number that neither rose nor fell 28 45% Number that rose and remained on higher level. 5 8 Number that fell and remained on lower level q 14 117 NI Number that either oscillated or else fell twice 21 33 Movements between Production Groups, 1917-1926. 4. tI abt If a similar analysis of the rise and fall of firms be- III tween quartiles be made for the period 1917-1926, what are the results, and how do they differ from those just obtained for" the earlier period? Eighty-four companies, each of which was in busi- .11 a, THIRD QUARTILE ,1TC,41 ness for at least five years during the period 1917-1926, /4 1111111W. are included in this new diagram, Chart 33. While the o 00 \, facts of the analysis for the earlier period are fresh in 5 our minds, we may at once summarize the situation for this later period as follows: Percentage of Total iif . sees 666 Number that neither rose nor fell so 59% 14.5 555d 1It7 Number that rose and remained on higher level 3 4 1717 Number that fell and remained on lower level io 12 Number that either oscillated or else fell twice 21 25 Chart 33: Movement of 84 automobile firms over the period 1917-1926. 204 THE AUTOMOBILE INDUSTRY RISE AND FALL OF FIRMS, 1903-1926 2o5 It will thus be seen that, while a considerable move- years ago and have subsequently fallen. Others have ment between groups took place during this later period remained on a high level, while still others have only of the industry's history, the percentage of firms which recently climbed upwards. All, however, at one time "stayed put," that is, remained within the same group or another in their history, have ranked among the over the period, is substantially higher than before. The first io makers of passenger cars in point of the number percentage of firms which oscillated is, conversely, some- of vehicles produced."' As in the study of exits and what smaller. The percentage of firms which fell and entrances undertaken in the preceding chapter, the term remained on the lower level is little different than during "firm" or "company" here designates a producing unit the earlier period. But the percentage which rose and rather than a corporate entity. Thus, the companies remained on the higher level is distinctly lower (4.o% which now comprise the five divisions of the present as compared with 8.o% ). General Motors Corporation—Buick, Cadillac, Chevro- Of the x o firms which fell from above the first quar- let, Oakland, Oldsmobile—are counted as separate pro- tile, it will be noted that only two ever returned. Both ducers. It happens, however, that the more recently of these, however, again dropped back. Of the seven organized Durant group of companies, because of the firms which succeeded in rising to the top group from form in which figures were available, is counted as a lower positions, only two remained there. One of these unit. This one anomaly in treatment occurs only in is now out of business, but the other still stands in the the last year which the study covers, and is therefore first division. not serious. The position of the 28 producers who in one or more S. Movements of Conspicuous Leaders Relative to years managed to qualify as members of the "first o" Each Other, P903-1924. are shown in Chart 34. Their positions relative to one The discussion of the preceding sections has dealt another are given at three-year intervals. Curves A, with the movement of firms from one broad group to B, C, to curve J, inclusive, represent the io producers another. The data to be presented in this and the who in 1903 led the industry in their individual volumes section to follow concern the fortunes of certain con- of production. Producer A was first; B, second; J, spicuously successful producers, each compared with tenth. Follow their fortunes in the years that follow. the other. Producer A is never again first. Producer B eventually Twenty-eight companies are included in this more stands in a position below tenth place and there re- detailed study. Most of them have tasted generously mains. Producer G, once sixth, is likewise now in the of success. Some attained the heights a score or more "under tenth" category. And producers C, E, F, I, and RISE AND FALL OF FIRMS, 1903-1926 207 J are out of business entirely. Producer D alone has risen; he now heads the industry, a position which he has held for over half the period. 2, •I I. .1 I. .0. If there had been no rise or fall of leading firms at all, relative to one another, the several curves of the diagram would never cross. As it is, however, the chart looks almost like a field of battle. Only five firms other 1111111111111 8 than Producer D have ever occupied the same relative positions at any two successive three-year intervals; 11111111511111. only one, other than Producer D, has ever occupied the same relative position at three successive intervals, except, perhaps, for those which fell below tenth place. 1111111,111. In There is in the melee, it would seem evident, no such thing as the "representative firm" depicted in economic S' theory as "holding its position year by year," typifying . ■ it the bulk of the establishments in an industry or trade. PA - lrilif it - 41 Whatever the validity of the concept for certain well- -

'roil"' 00 0 matured and more or less staple trades, clearly the "rep- - n

IL \ resentative producer" is hardly yet to be found in auto- k 11k- 0 ggilE1101 r mobile manufacture, not even over a period of 22 years w of its history. mo 0 But while virtually no firms have retained exactly K 1111110110211 111

1 the same ranks from one time to another, some com- va t panies have maintained, for considerable periods of M 1 \ I0

\ 0 U time, a much greater relative stability of position than ma PPr - 0 F. _„..itt have others. Observe, for example, producers D and 0 O 2 M. But examine also the extreme oscillations of pro- ducers Q, R, and V, and the brilliant climb made by producer Y, within a ten-year period. And note that such producers as N and W, who both entered after

2 o6 208 THE AUTOMOBILE INDUSTRY RISE AND FALL OF FIRMS, 1903-1926 209

1903, occupied high places in 1906 and 1912, re- into the forefront, most of the present leaders are not spectively, and now for many years have been mem- strictly pioneer companies; they date back only about bers of the "under tenth" group. a decade and a half. Mark also the total number of quondam above-tenth- The history of these leading companies which are place producers continuing in production, as compared not "pioneer" organizations in the sense of having been with the number who have gone out of business en- started by 1903, or even by 1906, reveals, however, tirely. Nine have withdrawn or failed; 8 remain, but the fact that every one of them was organized by men in the "under tenth" category. who had earlier been engaged in the automobile busi- ness. And, with but one exception, all the men who 6. Causes of Changes in Leadership headed these concerns had enjoyed not only automobile experience, but automobile manufacturing experience Of the to original leaders in 1903, only one remains before they started their own ventures. Many of them a leader in 1924. What percentages of those who were —a surprisingly large number—had been associated leaders at one or more of the several three-year in- with that pioneer exponent of quantity production, R. tervals subsequent to 1903 are to be found in this group E. Olds, in the Olds Motor Works, between 1898 and in 1924? 1903, at Detroit and Lansing. Howard Coffin, R. D. As the gap towards the year 1924 narrows, there is Chapin, and R. B. Jackson, all officials of the present a steady increase in this percentage. Of those who oc- Hudson Company; C. D. Hastings, of Hupp; A. Z. cupied tenth place or above in Mitchell, of Dodge Brothers; William E. Metzger and igoy—ilio remain in tenth place or higher B. F. Everitt, of Everitt-Metzger-Flanders; Charles B. 1906- 3/10 remain in tenth place or higher King, of the King Company; John D. Maxwell, of Max- 19o9-5/10 remain in tenth place or higher 1912-5/10 remain in tenth place or higher well-Briscoe; C. B. Wilson, of Willys-Overland—these 1915-7/10 remain in tenth place or higher are some of the men who early were connected in one 1918-8/10 remain in tenth place or higher manner or another with the Olds organization. Of the to leading firms in 1924, only two have been Others of the 1924 leaders were also once connected in the industry less than 10 years. But while nearly with pioneer firms. Thus, the Dodge brothers had made all these leading firms are seasoned producers in the parts for Olds and motors for Ford since about 1900 sense of being a decade old or more, only three of them and i9o9, respectively. Indeed, they already not only started before 1908-1909. In other words, although possessed a well-equipped plant, but had acquired such few firms organized within the last decade have sprung a reputation in the trade by 1914 that, following the 210 THE AUTOMOBILE INDUSTRY RISE AND FALL OF FIRMS, 1903-1926 211 announcement in that year of their plan to build and in favor of methods later devised by newer and bolder' market a car of their own, over a thousand dealers minds. throughout the country actually applied for the sales There is doubtless truth in this generalization. But franchise before even a sample car was ready for dis- it is possible to point out amore specific application of play. W. C. Durant and some associates, who started this general reasoning. Most of the 1903 leaders who the Chevrolet Motor Company in 1913, had previously either went out of business or fell below tenth place in been executives of the General Motors and other com- later years failed to sense the changes in market de- panies. W. P. Chrysler, before producing his own car mand which took place. Their products were quite well in 1923, had been an official of both Buick and Willys- made and often striking in appearance. But of these Overland. Similarly, the present Nash concern is not 10 leading firms, 8 either made or commenced to make only the descendant of the old Jeffery company, but its heavy cars after 1904-1905. The craze for stupendous head was at one time president of the Buick company weights and powers, however, lasted only a few years.'" and later of General Motors. It is thus important to Yet all these 8 producers except one continued the note that all the most successful units organized since manufacture of large models.'4° 1908-1909, while not pioneer organizations, have been Four of the eight firms made large models which piloted by pioneer manufacturers. were excessively heavy and cumbersome. All four soon This helps to explain the success of many of the pres- dropped from their leading positions. Eventually, three ent leaders of the industry, but how explain the demise of them withdrew from the field. The fourth firm still of those who led in 1903? On a priori grounds, it may continues to produce with substantial success, but has, perhaps be said that the producers who are the first of late, concentrated its energies upon a lighter type of in an industry will not all succeed, because the qualities chassis. required for innovation differ from those required for Only 3 of these 8 producers ever once attempted to continued commercial success. Those men who are first market any model which sold under $2,5oo, and the to sense the significance of new mechanical devices, like lighter models which they did bring out about 1913- the inventors of the new contrivances themselves, may 1914 constituted quite subsidiary parts of their lines. often not be possessed of "practical" ability. Certain Thus these 8 producers all faced the relative decline of those who pioneer in any field, though of great service which took place in the market for medium- and high- in their day, may, through having become accustomed priced cars and took no advantage whatever of the to methods and tactics which they themselves have de- great expansion of the low-priced field which began to veloped, be loath to give up those once successful ideas develop in 1910-1911. Yet, it should be repeated, 212 THE AUTOMOBILE INDUSTRY nearly all of these 8 firms manufactured quite excellent products, as standards in those days went. Their fail- ure to sense market currents, rather than any lack of VIII technical or manufacturing ability, accounts for their displacement as leaders. CONCENTRATION AND COMBINATION; MANUFACTURERS' ASSOCIATIONS.

1. The Scale of Production IN 1903, the largest plant in the automobile indus- try, the Olds Motor Works, made 3,922 cars. Today, the average annual (arithmetic mean) production per factory is 81,00o cars, while several of the larger fac tories make nearly as many vehicles daily as did the Olds Works in an entire year. This growth in the size of production units may be seen in Chart 35. As in previous production charts, the curves are here plotted on a logarithmic scale in order to show accurately the percentage changes in each item. Curve A represents the production of the largest firm, Curve B that of the firm standing exactly at the first quartile, Curve C the median firm, and Curve D, the firm at the third or lowest quartile. The detailed data of this chart are given in Appendix B (page 348). Only the outstanding features of the growth will here be discussed. The largest producer"0 in 1903 made slightly fewer than 4,000 cars. This number gradually rose until in 1908 it stood at about 8,500 cars. Then, in the next year, this figure of 8,500 more than doubled. A differ-

213 214 THE AUTOMOBILE INDUSTRY CONCENTRATION AND COMBINATION 215 Number of Cars 3,000,000 ent producer than in 1903 occupied first place in 1909, 2,000,000 but not yet the one who henceforth was to lead. A

,000,000 This doubling in the output of the largest firm be- tween 1908 and 1909 (it happened that the same firm soct000 was first both years) was a part of the general excep- tional rise in output (a i00% increase) which took 100,000 place between those two years.'" Following 1910, the too,000 scale of the largest firm's production, the Ford output, regularly increased at a rate varying from 3o% to 50,000 i00% a year, until in 1916 it reached the then prodi- gious figure of well over half a million cars. 10,000 The range between this figure for Ford and that for 10,000 the producer standing at the first quartile, always large, became steadily greater during this period. The size of 4,000 the firm standing at the third quartile, and also the

2,000 range between it and the lowest firm, likewise show in- creases as the industry grows. But the change here 1,000 ■ IPPIT1101111.111111 1 is not nearly so pronounced as with firms at the first MINI/ ML11111111111111411 NUMNI015111111 300 quartile. The figures for the firms at the lowest ex- treme of each year's series are so small that they have 300 V 200 not been charted. They oscillate throughout the peri- od, never running up to loo cars and often being below 100 A—La gest Firm D--, 0—Firm at First Quartile 20. They represent, in the main, companies which went C—tledlcm Firm 30 D-Firm at Third Quartile ■ out of business in the course of each year. NP 30 The interquartile ranges are wide. Since 1904, the li 20 1 I IUI II 1904 '06 '08 10 '12 '14 '16 '16 '20 '22 '24 '24 firm represented by the first quartile has never been

Chart 35: Scales of production in passenger automobile manufacture, less than about 4/ times the size of that standing at 1903-5926. the third quartile, and in 1926 is roughly so times as large. The median and the arithmetic mean production fig- 216 THE AUTOMOBILE INDUSTRY CONCENTRATION AND COMBINATION 217

1,000 100

500 400 --- Med on 300 -- Arithmetic Men 200

100

6

40 -h 30

20

10

5

4 20 3

2

0 1603 '04- '05 '06 '07 '06 '09 '10 11 '12 '13 '14 '15 '16 '17 'I '19 '20 '21 '22 '23 '24'25 '26 1003 '04;05 '06 '07 '06 139 10 11 '12 '13 '14 '15 '16 '17 '16 '19 '20 '21 '22 '23 '24 '25 '26 Chart 36: Median and arithmetic mean production figures per plant, r Below Q, Above 1903-1926. Chart 37: Percentage of automobile output produced by firms standing ures per plant,'" given in Chart 36, also show great above the first quartile, 1903-0926. variation. The great discrepancy between the two, isted. Even before 191o, the firms standing above the both of which increase as the industry expands, is due upper quartile seem to have produced from about 7o5 largely to Ford, but in part also to the growth of a to 905 of the product. In 1926, the proportion was number of other producers standing above the first 88%. Chart 37 shows the degree of concentration quartile. In 1913, for example, the first five producers which has prevailed from 1903 to 1926, all producers together made 213,000 cars, while the total output of included. the industry was only 462,000 cars. Similarly in 1916, Chart 38 shows the same thing, but excludes Ford the first five companies together made about a million figures. It is worthy of notice that the degree of con- cars out of the 1,525,000 that were produced in that centration has remained approximately constant over year. this period of 24 years; it is even slightly less now than A considerable concentration, then, has always ex- it was in 1903, a fact which, as regards the automobile

218 THE AUTOMOBILE INDUSTRY CONCENTRATION AND COMBINATION 219 100 "nrir r rr or or 7111,7 Ai A All Mil 4. A A/AAA 500 50 • • Ai 300

• 200 80 0 .0.

40 0 50

30

20 20

10 0 1910 12. 14 16 18 '20 '22 '24 '26 1905'04 '05 '06 '07 '09 '09 '10 '11 '12 '13 '14 '15 '16 '11 '16 '19 '20 '21 '22 '25 '24 '25 '26 Chart 39: Net worth of General Motors Corporation, 1909-1927. Below Ch Above Q1

Chart 38: Percentage of automobile output produced by firms standing zontal type, there have been only two notable attempts above the first quartile, Ford excluded, 1903-1926. to amalgamate competing companies."' One succeeded; industry at least thus far in its history, hardly supports the other failed. the Marxian doctrine. The General Motors Company, organized by William Crapo Durant towards the end of the year 1908, started 2. Combinations in the Industry's History. with assets of $18,000,000 and a net worth of about Unlike the course of events in certain other indus- $9,000,000. It nearly met disaster in 191o, but with the tries, the concentration which has existed in automobile aid of eastern banking interests was successfully re- production has not been accompanied by any great financed. At the end of 1926, its listed assets totaled amount of combination. Apart from the Ford Motor over $9oo,000,000 and its net worth amounted to about Company, which is in reality merely a highly integrated $64o,000,000, exclusive of good will and patents. The enterprise and in no sense a combination of the hori- rate at which the growth of the General Motors Com- zzo THE AUTOMOBILE INDUSTRY CONCENTRATION AND COMBINATION 2 2 I pany, or Corporation as it has been called since 1916, 70 has taken place is evidenced by Chart 39, which shows its net worth as of the beginning of each year from the 60 time of its organization in 1908.1" Besides controlling, either through ownership of their physical assets or SO through large stock interests, the Buick, Cadillac, Chev- rolet, and Oakland companies, the Olds Motor Works, 40 the Company, and the Yellow Truck and 30 Coach Manufacturing Company, the corporation counts among either its owned or affiliated companies 16 dif- 20 ferent parts and accessory firms, 18 export and over- seas companies, and the General Motors Acceptance 10 Corporation, a company organized in 1919 to finance the installment sale of General Motors products. As 0 '12 '13 '14 'IS '16 '17 '18 '19 '20 '21 '22 '23 '24 '25 '26 with other automobile companies, the present net worth 190010 '1 Chart 4o: Percentage of total American and Canadian motor vehicle output of the corporation has grown in considerable measure produced by the General Motors Corporation, rood-1026. from reinvested profits. Of the $576,o00,0oo which has been earned on its common stock during the period eral Motors has produced in each year from 1909 to 1909-1926, $313,000,000 has been paid out in divi- 1926 is shown in Chart 4o. The recent increase dur- dends; $263,000,000, or 47% of the total earnings ing 1925 and 1926 is due principally to the great suc- available for the common stock, has thus been rein- cess of its Chevrolet car in competing with the Ford, vested in the business. But although like its com- an episode which will be discussed in a later chapter. petitor, the Ford Motor Company, the General Motors Further figures relating to the corporation are given in Corporation stands head and shoulders above the other Appendix A, pages 3 25-3 28. automotive firms in point of size, it has in no sense ever The other large combination in the history of the attained a monopolistic or even dominating position in industry was the United States Motor Company, the industry, as did virtually, for example, the United formed in February, 191o, under the leadership of States Steel Corporation in the iron and steel or the , head of the Maxwell-Briscoe Com- Standard Oil Company in the petroleum field. The per- pany. It acquired a 99% ownership (or more) of the centage of the total motor vehicle output which Gen- capital stock of eight companies, among which were the 222 THE AUTOMOBILE INDUSTRY CONCENTRATION AND COMBINATION 223 Maxwell firm, the Columbia Motor Car Company, the come to compete. Consumers have different tastes; Dayton Motor Car Company, and the Brush Runabout they will pick and choose between different cars if these Company. It failed two and a half years later, with are offered. Even a reasonably large and powerful total assets of about $17,000,000 (exclusive of $12,- combination could not well hope to drive all competing 000,000 of "good wan."' The reasons for its failure cars off the market so long as these cars presented fea- are several, but the situation may be summarized by tures, or combinations of features, not possessed by the saying that the combination of companies was a re- products of the larger company. So long as room re- markably haphazard one. Geographically, they were mains for innovations in design and construction, room widely scattered; New York, Connecticut, Rhode remains for the "smaller fellow." It is to be doubted Island, Massachusetts, , and Ohio were states if genuine monopoly ambitions, aiming primarily at the represented. Two of the firms included were avowedly fixing of price through substantial control over the con- unprofitable in the period preceding combination and ditions of supply, have ever seriously prevailed in the were taken in largely on the basis of the trade names mind of any large producer."' of their cars. Out of the debris of this failure, the But most manufacturers gave not a thought to the Maxwell Motor Company, Inc., was organized, and con- kind of reasoning here suggested. They were much too tinued to make the Maxwell car.'" It alone remained, busy. And in this probably lies the chief reason why until very recently, of all the cars which had been no combinations other than General Motors and United brought within the United States Motor. Company.'" States Motor were formed. Throughout most of the The reason that consolidations in this industry have history of industry, the demand for cars has been such been so few probably lies partly in the character of the that the successful producers have had almost all the product, partly in the conditions of demand during the business they could handle. Facilities, in many years, early days of the industry, and partly in the attitude could not be expanded fast enough to meet the demand of the public towards it during this formative period. for the product; why then worry about combination Automobiles, however, are distinctly specialty prod- with other firms? It is the unsuccessful producer—the ucts. Thus monopoly, in the sense of an all-exclusive manufacturer saddled with a fixed overhead and not control of the market in general, is almost unthinkable. enough business to "absorb" it—who has a strong mo- Each producer has indeed a monopoly of his particular tive to combine. He hopes to improve his condition brand and design of car, and one producer may for a thereby. Mr. Briscoe has stated the motives which, time enjoy a virtual monopoly in his price class, as did to his mind, stimulated combinations, in language as Ford for some years. But other makes of cars soon follows: CONCENTRATION AND COMBINATION 225 2 24 THE AUTOMOBILE INDUSTRY

. . . . There was always the thought that if we . . . . should attempting to finance his first automobile manufactur- ever drop so far behind competition as to make it difficult to sell ing concern, feared greatly that the industry was rap- our product "off the fire," we . . . . would find ourselves in a idly becoming overexpanded. This was a year (1904) in very unfortunate financial situation I believe that at the bottom of every combination, either accomplished or attempted, which production was 2 2,000 cars. They pointed out that there is the belief that through the proposed combination will be the Olds Motor Works was making nearly 5,000 cars an opportunity for recapitalization, for securing more money to a year, the Cadillac firm planning a production of 6,000 place the project in a better financial condition. It is often the cars, the Ford Company just recently organized and claim that . . . . economies will be effected, sales effort concen- trated, etc., etc., but I believe the history of almost every com- already swinging into production. " 'How and where,' bination will show that the principal motive comes from being they asked, 'could all these cars be sold?' ''61 Few hard up.15° bankers, especially outside of Detroit, were willing to A third reason that so few combinations were effected risk capital in the industry. On the one occasion when was that little money was available for the automobile eastern bankers did participate in an automobile trans- industry in its early years other than what was earned action of magnitude, the refinancing of General Motors and put back into the business. Most automobile com- in 191o, they exacted the most stringent terms."' An panies have been built up principally from reinvested attempted combination between Ford, Buick, Maxwell, profits. Of the $61,000,000 net worth of the Ford Com- and Reo, four of the leading companies in 1908, fell pany in 1916, only $28,000 was ever obtained from out- through simply because Messrs. Durant and Briscoe side sources; of the 's $7,- (representing Buick and Maxwell, respectively) saw 000,000 net worth in 1916, only $99,000 had come from little possibility of obtaining sufficient cash to satisfy elsewhere; of the Reo Motor Car Company's $9,000,- Messrs. Ford and Olds. The two latter were willing 000 net worth, only $144,000.160 With other com- to combine, but demanded payments of at least $3,- panies, the situation was similar—in the vast majority 000,000 each in cash for their concerns instead of the of cases they have had to finance themselves. Thus it stock of the combination which was offered to them."' was not possible to offer much in the way of financial This is the only attempt which I have been able to inducement to firms when one firm wished to purchase discover of a serious effort at combination, other than or to merge with another. The stocks of automobile the subsequent instances of General Motors and United firms, whether consolidations or otherwise, could not States Motor, promoted, respectively, by the same readily be sold to the public. two men, Durant and Briscoe, who but a short time Mr. Briscoe puts well the skepticism which prevailed. before had hoped to combine their companies with The capitalists upon whom he at one time called, in Ford and Reo. CONCENTRATION AND COMBINATION 227 3. The Association of Licensed Automobile Manufac- turers. But while combinations have been few, the forma- tions of patent and trade associations in the industry have been important. Both the present National Au- tomobile Chamber of Commerce and the Society of Automotive Engineers are outgrowths of a "License Association" formed in 1903 and not disbanded until 1911. The influence upon the industry of this organi- zation—the Association of Licensed Automobile Manu- RANSOM E. OLDS WILLIAM CRAPO DURANT facturers, or the "A. L. A. M." as it was called, has, in Builder of the curved-dash Olds- Formerly president, Buick Motor mobile and formerly vice-president, several directions, often been both exaggerated and Company; organizer and formerly Olds Motor Works; chairman, Rco president, General Motors Corpora- Motor Car Company. tion; president, , misunderstood. Its history may therefore here be out- Incorporated. lined. About 1877, George B. Selden, a patent attorney of Rochester, New York, and a graduate of the Sheffield Scientific School at Yale University, began directing his attention towards the development of a "road en- gine." Two years later, in 1879, he filed an applica- tion for a patent upon this device, which existed as yet upon paper only. By shrewd, but quite legal, methods he succeeded in keeping his patent from being granted for sixteen years: that is, he constantly withdrew, modi- fied, and reworded the claims of his application. • In the

BENJAMIN BRISCOE HENRY FORD language of Hough, District Judge, whose opinion was Formerly president, Maxwell - Formerly chief engineer, Detroit delivered in 1909, Selden "usually, after a rejection Briscoe Company; organizer and Automobile Company; organizer formerly president, United States and formerly president, Ford Motor Motor Company. Company; majority stockholder, made or criticism offered by the examiner . . . . did Ford Motor Company. nothing by way of amendment for about two years— the extreme limit of inactivity then permitted by the Figure 20: FOUR PIONEER MANUFACTURERS WHO IN I908 DISCUSSED A POSSIBLE MERGER OF THEIR COMPANIES.

226 228 THE AUTOMOBILE INDUSTRY CONCENTRATION AND COMBINATION 229 rules of Patent Office practice. By these means he re- carbon gas engine of the compression type," were not ceived in 1895 a patent for an invention of 1879, and patentable at all because they constituted merely a in the meantime had never built a motor car, and never combination of known and existing elements. succeeded in getting anyone sufficiently interested in Coxe, District Judge, at once overruled this demur- his theories to experimentally try them out."'" rer.'" Litigation continued; and on March 5, 1903, Meanwhile, the infant au- the Association of Licensed Automobile Manufacturers tomobile industry developed was formed by the Electric Vehicle Company and 18 quite independently of Selden other manufacturers, including the Winton Motor Car- and his patent, and the small riage Company. A list of these charter members is factories of Duryea, Olds, appended to the association's Articles of Agreement, Winton, and others began to which appear in Appendix C. In consideration of being turn out cars. In 1889, how- granted .a license to make cars, each manufacturer paid ever, Selden assigned to the to the association a royalty of r Yi.(70 of the catalogue Electric Vehicle Company,' (retail) price of all vehicles which he sold. Of this a concern in which Messrs. %, three-fifths was retained by the Electric Vehicle George H. Day, W. C. Whit- Company, the owner of the patent, and the other two- ney, Anthony F. Brady, fifths went into the association's treasury, any or all of Thomas F. Ryan, and P. A. which amount, at the direction of the executive com- Figure 21: GEORGE 13. SELDEN, B. Widener chiefly seem to mittee, might be employed for legal expenses in enforc- who on November 5, 0395, re- ceived Letters Patent No. 549,160. have been interested, exclu- ing the patent. Any residue remaining upon the ter- sive rights to his patent with mination of the agreement or "the dissolution of the power to grant sublicenses. The storm was not long association for any cause" was to be distributed to the in brewing. The Electric Vehicle Company soon an- members pro rata in accordance with their original nounced its intention of enforcing the "basic" Selden contributions. patent, and in 1900 brought suit against the Winton The association lasted eight years. Litigation was Motor Carriage Company. The latter, in its demurrer, continuous; a number of manufacturers who refused to asserted that the patent was invalid, contending that join organized a rival association, the American Motor Selden's plans, which covered "a road locomotive, pro- Car Manufacturers' Association. But in September, vided with suitable running gear including a propelling 7909, Judge Hough, of the Circuit Court, after prob- wheel and steering mechanism, [and] a liquid hydro- ably the most exhaustive legal and technical considera- 23o THE AUTOMOBILE INDUSTRY CONCENTRATION AND COMBINATION 237

100 tion of the details of any letters patent which has ever Imm• .••■ • ...N. been undertaken, gave a decision upholding Selden's / / claims."' The opinion was delivered after dozens of 90 technical experts, some of them brought over from / / England and France, had testified, and scores of ex- 80 o.4.,, ■■• .INN / \ hibits, including even a car which was built to order in ..*" \ I accordance with the original Selden plans, had been 70 presented. It constituted a smashing triumph for the \ / Licensed Association, and by the end of 1910 nearly 60 \ / every recalcitrant manufacturer except Ford and \i / Thomas B. Jeffery, another pioneer whose opposition 10 1 was most determined, had either joined or taken out a license. 40 The proportion of the automobile industry's output upon which royalties were thus paid may be seen in 30 Chart 41, which shows the percentage of total produc- tion by members and licensees, from 1903 to 1911. 70 — Including Ford Output -..— Excluding Ford Output These figures are shown both excluding and including I the Ford Company. Taken either way, the production 10 of the Licensed Manufacturers amounted to approxi-

0 mately 70% to 8o% of the total between 1903 and 1903 *904 1905 1908 1907 1'4 08 1909 to 0 tool 1906. Then, due doubtless to the fact that, while liti- Chart 41: Percentage of total passenger car output produced by "licensed gation over the patent dragged on, no dire consequences manufacturers," 1903-1911. to the non-licensed makers occurred and therefore few the total, excluding the Ford production. Including new entrants into the field joined the association, its Ford, the figure came to about 85% in 1910 and 70% percentage of production fell off by 1908 to only about in 1911. 45% to 50% of the total. Following the court decision The influence of the Selden association upon the de- in 1909, however, the unlicensed manufacturers at once velopment of the industry, although most important capitulated, and the association's percentage of output from the point of view of standardization and technical amounted, in 1910 and 1911, to practically T00% of research, was neither so dominant nor so oppressive, 232 THE AUTOMOBILE INDUSTRY CONCENTRATION AND COMBINATION 233 upon the purely commercial side of things, as might to restrain those manufacturers who would not join its perhaps be imagined from these figures. The royalties, ranks. It is true that after 1909, when more than 6o although large in the aggregate, were fixed at a more or companies applied for membership, not all were ad- less nominal percentage so far as the individual car mitted, but most of these, though not admitted to maker was concerned: first 1% 5, later, in 1907, at membership with the privilege of voting or attend- only 8/10 of 170. Thus, whatever the merits of the ing the association's meetings, were nevertheless patent, no very enormous burden was placed upon the granted licenses to manufacture. By limiting both manufacturer. The total of all royalties, I have esti- membership and licenses, however, to concerns who mated, came to approximately $5;800,000.188 Three- were held to be "good and reliable manufacturers,'" fifths of this sum went to the Electric Vehicle Com- the association doubtless protected both the automo- pany (and out of this share, an unknown amount to tive industry and its customers, to some degree, from George B. Selden) ; while the remaining two-fifths was unscrupulous exploitation, and this, apart from what- used by the association largely for legal fees. ever actual unsettling effects its various lawsuits may Furthermore, the association in no way attempted to have occasioned, probably stabilized somewhat the gen- restrict the manufacture of cars. In the market, its eral conditions of production and market competition. members competed with one another vigorously. What- That consumers were in some cases actually intimidated ever may have been the original intentions of the or- from buying the products of perfectly "good and relia- ganizers of the Electric Vehicle Company, the Selden ble" but unlicensed manufacturers is, however, quite association was thus in no sense a monopoly. Member- probable; certainly the advertisements of the A. L. ship in the association—or at all events, a license to A. M. attempted to accomplish this result. In response manufacture—was open to anyone who could demon- to the association's repeated warning "Do Not Buy a strate that he was actually engaged in the production of Lawsuit with Your Automobile," the Ford Company gasoline automobiles and was not merely a "fly-by- offered to give each purchaser a bond protecting him night" seller of stock certificates or of a hastily assem- against any damages that might arise from this quarter. bled experimental vehicle. Both the size of the member- Such, then, was the situation at the beginning of ship and the evidence given during the trial seem to 1911. The patent had been sustained—although in the establish this fact clearly."' The association never language of Judge Hough, "a patent fit only for trib- attempted either to set any figures for the production ute7171—and virtually all manufacturers except Ford of cars nor to place any limit upon the number of firms and Jeffery had joined the association. But following that could make them, save, of course, that it sought Judge Hough's 1909 decision, the case had been carried

CONCENTRATION AND COMBINATION 235 to the Circuit Court of Appeals, and the decision which that court announced on January 9, 1911, spelled the Gasoline Automobiles end Selden Patent end of the Licensed Association. lbe Isso/rt Irders Petrol Na w tod sens..4 1., lb,onte II. IfiW ...I Woolly eleolsoblIrs ebbe es, The patent, after eight long years of litigation and fir Vowel..., 4.4 Ponele, to leo wooed weed re len. wle -Mere 1. 1 l enolnel lelrot N... :6 Na .ski owe le weedered de leolert le de •111be14e rt. the accumulation of 26 volumes of testimony, was still ...see. so rerter le wed or boneless med. we." The 044.1. proOlerten. •54 ch• dill In 110 5,011.0 Awns. on .+ 451 Volt. Biel. .M Itortie. need. I0.1 I Or 3M b P. one drew. Wet IS. S.W. colcel sustained. But—it was held that the Ford Company American Manufecturers. AMMO. MOO. AWOMMIMI CIC New. iste. had not infringed it. The technical basis for this con- AVTIWINM re_ Newel mews re. OM OM MM01•0 COMM. 0•10.1 MOM CC V COMILLM 0, MM. MO clusion need not here detain us; the difference between rawer COMMACIIIMOM IMMO. Wm 1mor CM. N VISO COMM011. *MOO CO- MOM OM C000•0 CIAMCFACM MOO CO. compression and noncompression, between constant vol- IC IC MOM.. ACOOLM T. • IMMMWFMMM Mom M. ✓ICK 10111C Mot CATIONLI 011- MM COMM AM00001M M. ••••■■el.11. lama ume and constant pressure hydrocarbon engines, con- sennewons •IC OM, MirbarrIMS }MIMIC( O.M.CMCIMMI CI, IMM. Mel OMR OMMII IMMO OMM, COM ✓OMMO MIOTO• MCI 0, MOM WOO. cerning which the lawyers and technical experts had CM MOM,. MIMI MOM MIC cOMON IC mows se. MOM V. V MO MCIVISINO OP- MAIM Ma ran 1•700 CAlt wrangled for so many years, will not here be dis- OMOIMII MICOMMIC *AC MIK OTMOCOM COMM OMMOTIMI CO.. Mom Mc P. • • oFEC EIM • M. • MM. CO. ClAmo MOa. cussed.172 MIMI MOM, 100. • IM One. 0 V It will suffice to state that the Selden patent MO IL •VMMI O. 0•0000, •CMIHMILll MO MO 00. V. IC MOMS 7•01O• CI, MOM IC V was held to cover only road vehicles propelled by the VOI1.170111 IMMIFACTIMM VOIIM WMIMI COMMOIC rte.. 46 Irtormarteres SpronselolLa Ce- •■•.. T. Brayton type of engine, in which the charge was com- Importers. AUTO tweet ool. a MOM. ACOMMOILS U W. MI elee rune. SeroeseeeLe re- MI Moho, F. IL pressed by an outside device before being introduced OMMIOIM • 1,1010•000 IC W. CM O. IC V. V. U.S MCM 10 10 ••• a, IC V. MOICOMO •0701.000/ M. OF , into the cylinder; whereas the Ford car, in common W•017 • WMILIOI. 08 M Am IC V. /MOM. • MVAMM. MI W. IM K. IC • 11.011IMMMT MTOWOMM N1 we ass. N. T. ,loporlen awl cern .1 see 4.511.' Is soen.. rem owl with every other motor vehicle of American manufac- tM Poll11 U. berootter odd be IMMOlvt. ture, was propelled by an engine of the Otto type in Do Not Buy a Lawsuit with Your Automobile which the reverse of this was true. If Ford had not AAA TWAT A IS ON THE 0A• TOY •UNONAAR. infringed, then no one had ever infringed; and the Asso- ALL PERSONS ARE NOW FINALLY WARNED ted IMlPMP. wansferlorIns. Drift( Sal r.. ealkered owed. oetosestelea ciation of Licensed Automobile Manufacturers was mode will Itlboydos. Wooed le...Olt Adore.. of :er Perk Igoe. Nee Tort CIW. bee bee. ooderlool b statt edloolew.• shk p.n.s Wm... A. ere •MICOMOII tent. Made sebsOle. Oro hew lo (be owe eoelttlegl, lord.. the 704600 rout Introdello pert.. 6.1.1 tom soelsot crowned.. dissolved. Idea sod else Aare Wool to /mud Indobteel letdown. Wessel, Ise to le.., end effort. ertilrertto ASSOCIATION OF LICENSED AUTOMOBILE MANUFACTURERS, 4. The National Automobile Chamber of Commerce 7 LAST 42d ST., NSW YORK. In its stead, arose the Automobile Board of Trade, and then, succeeding it in 1913, the National Automo- Figure 22: A TYPICAL ADVERTISEMENT OF THE "LICENSED ASSOCIATION" DURING ITS CAMPAIGN TO ENFORCE THE SELDEN PATENT. bile Chamber of Commerce. The Society of Automo- tive Engineers continued the technical research begun by the Mechanical Branch of the old Licensed Associa- 234

236 THE AUTOMOBILE INDUSTRY tion, while the National Automobile Chamber of Com- merce, in which now were included all firms save the Ford Motor Company, became the automotive makers' trade association. To this day, the Ford Company has not joined the chamber, although the , now a Ford subsidiary, is a member. The most significant aspect of the activity of the National Automobile Chamber of Commerce is that while, like the association which preceded, it has no monopoly power, it substantially alters the character of automotive competition. For one thing, each com- ROY D. CHAPIN CHARLES CLIFTON Vice-president, National Automo- President, National Automobile pany reports its production to the chamber monthly, bile Chamber of Commerce, 1918– Chamber of Commerce and pre- 19 27 ; president 1937—; pioneer decessor organizations, 1904-1927; and each company receives monthly, in confidence, both advocate of roads• chairman, honorary president, 1927- Hudson otor Car Company. chairman, Pierce-Arrow Motor Car the combined and the individual reports of every other Company. member. Thus each firm knows exactly what the state of his competitors' business is; there are no secrets as regards either the volume of sales in units or their value in dollars. Such a cooperative interchange of in- formation—until recently upon a quarterly rather than a monthly basis—has existed since 1903. More unusual and important, however, is the ar- rangement by which members of the National Automo- bile Chamber of Commerce "cross-license" all patents. This unique co-operative arrangement, adopted in 1915 largely under the leadership of C. C. Hanch, now em- Underwood end Underwood braces 300 separate patents which relate to various C. C. HANCH ALFRED REEVES Formerly chairman, Patents Com- parts of an automobile. Each member of the chamber mittee, and director, National Auto- Formerly sales manager, United mobile Chamber of Commerce; States Motor Company, general permits any other member to use, without the payment secretary and general manager, manager, National Automobile National Association of Finance Chamber of Commerce and prede- of any royalty, any patent which his firm owns; and he Companies. cessor organizations, 19!!– in turn, is privileged to use freely any or all of the Figure 23: FOUR LEADERS IN AUTOMOTIVE COOPERATION.

237 CONCENTRATION AND COMBINATION 239 238 THE AUTOMOBILE INDUSTRY ment is that certain of the larger companies now spend patents now owned or newly developed by his corn- such huge sums in the deliberate development of new petitors. The tremendous importance of this unusual designs that it was not considered fair to ask them to system of cross-licensing becomes at once apparent if contribute the results of this research gratis to the en- it be reflected that in the absence of such a scheme, an tire industry. Technical improvements formerly came individual or a firm which developed one new automo- from many different quarters, and came almost inevit- tive device would, if it sought to manufacture cars, ably, one might say. Now, with the industry having have to obtain licenses and pay royalties to use sev- reached maturity and the motor car a comparatively eral hundreds of other patents, or else infringe on perfected product, the bulk of the new devices and de- them. Excessive legal entanglements which might thus signs seemingly arise chiefly through a process of de- have resulted have been avoided by the cross-licensing liberate and organized research—a program which is agreement. During the twelve years in which it has undertaken principally by the larger concerns; hence the been in force, not a single lawsuit between chamber alteration in the patent agreement. members relating to any patent covered by the agree- ment has taken place. "Revolutionary" patents, for example, entirely new types of engine such as the Knight motor, or an entirely new type of transmission, are not included in the agreement, nor are external body shapes or other "design patents." To date, how- ever, no mechanical or electrical patents have developed which have constituted such radical departures from present practices.'" This cross-licencing agreement, as it was adopted in 1915 and continued in force until 1925, thus included not alone patents which members owned in 1915, but also all patents which might be taken out up to the year 1925. In 1925, the agreement was renewed for a five-year period. The renewal, however, includes only the patents taken out previous to 1925, not new patents which are obtained now. The reason for not including currently obtained patents in the new agree-

-71r1R{P7-77 7 , FORTUNES OF LEADING PRODUCERS 241

IX

THE FORTUNES OF LEADING PRODUCERS

1. The Net Incomes of Ford, Reo, and Packard, 1905- 1926

THE firms that have engaged successfully in the au- tomotive industry for a number of years have enjoyed Figure 24: HIGHLAND PARK PLANT OF THE FORD MOTOR COMPANY. prosperity in varying measure. It will be of interest to examine their gains, first individually, then collec- pany earned in net profits in that year $69,000,000;1" in each of the two years immediately following, it tively.'" earned roughly about the same, and in 1922, 1923, and Incorporated June 16, 1903, the Ford Motor Com- 1924, about $100,000,000 or over each year.'" pany started with $28,000 paid into its treasury.' Not a dollar additional has been invested in this busi- The present plant capacity of the Ford Company ness apart from earnings.'" Its gross assets in 1926 is probably about 2,000,000 or more cars and trucks totaled $784,000,000; its net worth was approximately a year. Though the company by no means makes all $700,000,000. All the stock of the company is owned the parts for its cars, it is the most highly integrated by Mr. Henry Ford, his wife, and his son, Mr. B. concern in the industry. It operates not only blast furn- Ford, its present chief executive. At the outset, Mr. aces, foundries, and coke ovens, but also saw mills, Henry Ford owned but 25%70 of the stock; but in steel freighters and lake steamers, a railroad, and main- 1906 and shortly thereafter he purchased a sufficient tains a daily airplane service between Dearborn, Mich- number of shares from other stockholders to raise his igan, and its Chicago plant. It has 32 establishments holdings to 58% .7,1" In 1919, Mr. Edsel Ford bought scattered over the United States and employed in 1925, from the Dodge Brothers, James Couzens, and others, exclusive of foreign branches and plants, over 161,00o the entire remaining 41% % of stock. The price paid persons. In the year 1921 it made over half of all the for these shares was approximately $75,000,000, or automobiles produced in the United States. What its $12,500 for each share of $roo par value.'" The corn- percentage of the total output of cars and trucks has

240 242 THE AUTOMOBILE INDUSTRY FORTUNES OF LEADING PRODUCERS 2 43 377-6% 2:5 2% 100 160 , A I i \ so 14 II i \ 1\ I I \i l 1 -1,700 Packard 60 i I 1. 120 l- i 1. / 1 i . V I 1. 40 I 100 I i \ \ i I 20 i i il- 80 1

0 A i, 1904- .06 '08 '10 '12 '14' '16 '16 '20 '22 '24 '26 il l \ \ i Chart 42: Percentage of total American and Canadian motor vehicle output 00 1 0 produced by the Ford Motor Company, 5903-5926. y A I' , , V 1 i -I been in other years before and since 1921 can be seen I' k1 40 in Chart 42. % I \ The yearly rates of profit which, from 1905 to 1926, \ have financed the Ford Company's remarkable expan- --/ 20 ,. sion are shown in Chart 43. Never below 45% until • V 1917, its annual net earnings have several times equaled r A / over T00% upon net worth. The rates of profit for A / 0 A■ the year 1907 and 1910 are not shown in the chart be- -5 i 1905 06 '07 08 09 '10 15 14 '15 16 '17 '18 '19 '20 '21 '22 '23 'E4 '25 '2 cause the vertical scale does not run high enough. They Chart 43: Percentage of net profits to net worth: Ford, Rco, and Packard were 378% and 215% respectively. Also, the chart companies. Ford figures for 1922-1926 estimated (see Appendix B). does not show the earnings for the I51/2 months' fiscal pany's rate of earnings underwent a marked decline. period ending in 1904-283% upon net worth. Only in two years of the 8-year period 1921-1924 did Commencing with the year 1917, however, the com- earnings reach 40% or higher. Always, however, they 244 THE AUTOMOBILE INDUSTRY FORTUNES OF LEADING PRODUCERS 245 exceeded 20%, except in 1924, 1925, and 1926, when have so expanded the market for the Ford car. The they fell to new low points of 18.3%, 12.1% and 9.2% internal organization of the Ford factory takes its whole respectively. The profits figured for the years 1922- form because of the fact that only one type of product 1926, however, are merely estimated (the Ford Com- is produced there. And not only is one fundamental pany has not made public its earnings for those years) type of produce" made exclusively, but that design and may not be nearly so accurate as for the earlier was continued virtually unchanged, except for refine- period. The basis of these estimates is explained in ments in body line and provision for self-starter equip- Appendix B, pages 352-354. ment, for 18 years.'" Thus all the economies of highly This remarkable record of rate and amount of profits repetitive production which follow any policy of ex- over a 2o-year period (only after 1923 did the rate fall treme and continued specialization in the manufacture below 20%) has probably never been equaled by any of a complicated machine-made product (provided that manufacturing enterprise. The reasons for it seem to the market calls for the product in large or increasing center about the recognition, on the part of Mr. Ford quantities) could work out their fullest effects. and his aides, of two fundamental economic principles. Under favoring conditions, the interrelations between In the first place, they have fully appreciated the fact manufacturing policy and marketing policy are such that larger quantities of any useful article can be sold as that an appreciation of either principle mentioned, that the price is lowered, and that the sales of some articles of demand elasticity or that of specialization of product may thus be increased far more than in proportion to coupled with the continuation of the same design, accel- the decrease in price.'" In the automobile business, the erates the working of the other. A lowering of price application of this simple principle of elasticity of de- calls for larger-scale production, and larger-scale pro- mand was of vital concern.'" Coupled with it was the duction again enables price to be lowered. The cumu- concept of cost to the consumer as embracing more than lative effect of the adoption of these two principles is original outlay. Thus, the Ford car was light and was the primary cause of the amount and rate of the re- simply made and, in comparison with other cars up to markable Ford earnings.'" about 1916-1918, cost little to operate. The relative shrinkage in the rate of Ford earnings The other principle so firmly grasped by Ford is since 1916 cannot affect the general verdict as to the nothing more nor less than that of the division of labor. exceptional character of the Ford Company's industrial The enormous gain in productive effectiveness which record. The Ford Company's achievement will always ensues from specialization in production is primarily remain one of the most amazing episodes of industrial what has enabled the steady price reductions which history. It is greatly to be regretted that no unbiased, FORTUNES OF LEADING PRODUCERS 246 THE AUTOMOBILE INDUSTRY 2 47 detailed history of this organization has been published. 2. The Earnings of Six Other Companies The few short works which have been written are for The Ford, Reo, and Packard figures just presented the most part either eulogistic or condemnatory. run from 1905 to 1926. Three other series of figures The two other highly successful producers whose his- which are available run from 1909, 1910, and 1915, to tory stretches over a 20-year period or longer, apart the year 1926. These are for the General Motors Cor- from those firms now included in the General Motors poration, the Hudson Motor Car Company, and the Corporation, are the Reo Motor Car Company and the Willys-Overland Company. The General Motors fig- Packard Motor Car Company. The Reo Company ures from 1909 to 1916 include Cadillac, Buick, Olds- was organized at Lansing in 1904; the Packard firm mobile, Oakland, and certain cars which have been dis- originated at Warren, Ohio, in 1900, but was moved to continued, while from 1917 to 1924 they include also Detroit in 1903. The one engaged at the beginning in Chevrolet and several other units which were added the production of fairly low-priced cars; the other has (and later discontinued) during these years. All the always made an expensive product, although of recent firms that were included in the General Motors Com- years it has made medium-priced cars also. Both con- pany when it was organized in 1909 were in business cerns, like most other automobile companies, have been previously; some, like Oldsmobile, Cadillac, and Buick, buit up chiefly out of income. The Reo Company were started in 1903 or earlier and had earned profits at started with less than $100,000. No additional funds high rates. With inadequate figures for the early pe- have ever been invested, other than earnings. Its net riod, however, it is advisable to begin with 1909, the worth in 1926 was nearly $50,000,000. The Packard first operating year of the consolidation. firm sold additional shares some years after it was or- As to the three curves for General Motors, Hudson, ganized; nevertheless, 81% of its $45,000,000 net and Overland, shown in Chart 44, it is merely to be worth in 1924 represented reinvested profits."' noted that, over the greater part of the period, all three The rates of profits which these two firms have en- curves are much like the Reo curve in Chart 43 pre- joyed from 1905-1924 are shown in Chart 43 also. The ceding. It will be seen that Hudson was the only one Reo curve in general runs higher than the Packard one; of the three which did not suffer a deficit in 1921. but both set of figures, prior to 1910, stand well above Finally, in Chart 45, we have the profits, over shorter 40% each year. Both curves in general follow the periods, for three other producers, the Nash Motors Ford curve, but stand well below it at nearly all times Company, Dodge Brothers, Inc., and the Studebaker prior to 1917. On several occasions, Reo's annual rate Corporation. The first two of these firms, it will be of profits has reached 6o% or higher. 248 THE AUTOMOBILE INDUSTRY FORTUNES OF LEADING PRODUCERS 249

53 10 I 1 SO 1 8 1 1 1 — Nash 1 --— Dodge General Motors 1 —•—• Studebaker 8 1 1 —..—. Willys-Overland 10 1 I X

it 1 6 X ' I 30 X \ X 1 I 5 A '1 X I ,\ /1 I el'` e I X I ‘ e I I X / ‘ / 40 I I \ / 2 X / ‘41/ I 11 li I / 1 / t`• \. \ . •-\ / ., 30 I \,/ 1 ...N. \ 1 1 I I \ / I 1 1 I , t 20 I I 1 I \ I 1 \ \ I i Ii f 10 \ .\ .1 O 1919 1920 1921 1922 1923 1924 1923 0026 0 )_. 1919 1917 1918 Chart 45: Percentage of net profits to net worth: Studebaker, Nash, and Dodge companies. -10 1909 10 '11 12 '13 '14- '15 '16 '17 '18 '19 '20 '21 '22 '23 '24 25 26 somewhat sharply. The Studebaker earnings evidence Chart 44: Percentage of net profits to net worth: Willys-Overland, General a general rise during the period for which they are Motors, and Hudson companies. shown. They are charted only from 1921 on because noted, have earned somewhat higher profits in several of the fact that prior to that date they included the recent years than have most of the producers already profits of that firm's wagon business, which was liqui- mentioned, but their rates of return have oscillated dated in 192o. 25o THE AUTOMOBILE INDUSTRY FORTUNES OF LEADING PRODUCERS 251 *350 The average measure of success attained by four of these companies, together with another firm, the Pierce- Average of 50 Rails and Industrials Arrow Motor Car Company, whose earnings have not 280 Average of 5 Autornotive5 been charted here, is reflected in the annual price ranges 1:1 of their shares on the New York Stock Exchange from 1917 to 1926, presented in Chart 46. These averages, 210 • unlike many compilations of stock prices, have been computed so as to make proper allowance for stock divi- dends and new stock issues. They show that the figures 140 1111 at which the common stocks of these five companies, Willys-Overland, General Motors, Packard, Pierce- Arrow, and Reo, sold in 1926 averaged a low of 214 and folo• ,q,. Mia"s.1.111112L1"111111111111 1111 a high of 344, as compared with figures of 44 and 71, respectively, in 1917. The 1926 low and high figures 0 represent increases of 382% and 385%, respectively, 1917 1918 1919 1920 1921 1922 1923 1924 1925 1926

over the 1917 prices. For comparative purposes, the Chart 46: Annual price ranges of automotive stocks and of rails and indus- ranges of 5o industrials and rails are charted also. Their trials, 1917-1926. 1926 low and high, respectively, average only a 74% amounted to approximately $4,500,000. Had $10,000 and a 51% increase over the 1917 figures. worth of the General Motors Company's stock been The enormous gains reaped by the few fortunate bought in 1908, the holder would have had an equity of persons who early committed their. funds to that "vi- approximately $650,000 in 1926; while the market sionary" branch of manufacture, the automobile indus- value of his shares, at the high quotation of that year try, may again be stated in a still more striking manner. (225Y) would have been well over $1,000,000. This To take four examples: $10,000 invested in the com- assumes that no rights to purchase new stock issued by mon stock of the Reo Motor Car Company at its or- the General Motors Corporation had been exercised. ganization in 1904, with no further contribution of But had all such right been taken advantage of, the funds or purchases of stock, would have amounted to an total cash outlay would have amounted, by August, equity of approximately $2,000,000 as of the end of 1927, to $99,500; the total market value of the shares 1926. The same sum invested in the Hudson Motor Car Company in 1909 would, by the end of 1926, have held, to about $1,675,000; the total market value of 252 THE AUTOMOBILE INDUSTRY FORTUNES OF LEADING PRODUCERS 253 the holdings plus the cumulative total of cash dividends Pierce-Arrow Company, for which data have been ob- received, to slightly over $2,000,000.187 tained running back to 1916. Finally comes the fourth illustration, that of the There are included in this compilation, then, io en- greatest "money-maker" of all time. Had $10,000 been terprises which are separately controlled as of 1926 invested in the Ford Motor Company in 1903, this sum (counting General Motors as only one company), but would have constituted nearly one-third of its entire the number of separate producing units ranges from 9 paid-in capital. With no further cash investment what- to 15 throughout the period. As of 1926, the number ever, this sum would, by the end of 1926, have of such producing units included is 14; the capitals of amounted to the unbelievable equity of $275,000,000 the following are included: Cadillac, Chevrolet, Buick, (two hundred and seventy-five millions of dollars).188 Dodge, Ford, Hudson, Lincoln, Nash, Oakland, Olds- mobile, Pierce-Arrow, Reo, Packard, Studebaker, and 3. The Level of Profits as Represented by Nine to Fif- Willys-Overland. teen Large Concerns Though this figure (9, 12, or 15 companies) repre- If the capitals and the earnings of these several pro- sents in no year more than about one-quarter of the ducers are now surveyed as a whole, it may be possible total number of companies engaged in the industry, it to draw some tentative conclusions as to profits in a includes, especially in recent years, a very considerable new industry. In order to ascertain earnings for the proportion of the industry's invested capital, in 1926, entire industry, it would be necessary, according to 88%. The extent to which these figures are indicative Marshall, to subtract "from the aggregate profits of at various intervals of the industry as a whole (cars and the successful . . . . the aggregate losses of those trucks combined)190 can be seen from the table on page who have failed . . . . then divide the remainder by 254. the sum of the numbers who have succeeded and those Total capital figures for intermediate years prior who have failed.'"" Although this counsel of perfec- to 1919 are not available. It is probably true, how- tion cannot be followed in this case, nor, perhaps, with ever, that in the years prior to 1915 the net worth of exactitude in any industry, it is nevertheless worth the firms here included constitutes somewhat less than while to plot, as in Chart 47 on page 256, the annual one-third of the capital of the whole industry; from earnings, or losses, over the period 1910-1926, of all 1915 to 1918, probably, on an average, about one-half companies for which the individual profits figures have the total; while from 1919 on, it represents by far the already been given. To these, to make the picture as larger proportion of the industry. complete as possible, are added the earnings of the The earnings here listed, therefore, do not indicate 254 THE AUTOMOBILE INDUSTRY FORTUNES OF LEADING PRODUCERS 255 CAPITAL INVESTED (Millions of dollars) would have been for a number of one-time prosperous concerns to have lost a large part of the earnings which Percent of they had reinvested. But this occurred very infre- Whole Producers Total Capital Year Industry* Here Included here Included quently; for, as has already been pointed out, few firms that were markedly successful subsequent to 1906 1910 1 7 4** 35 zo% 1914 407 107 26% ever met with misfortune, while those producers who 1919 1,015 6o6 6o% were successful prior to 1906 and later lost money, had 1923 1,571 1,209 77% 1924 1,691 1,374 81% invested, under the scale of production which then ob- 1925 1,888 1,600 85% 1926 2,089 1,838 88% tained, a relatively small amount even in the aggre- gate, that is, a sum small in comparison with the huge Net tangible assets. "" This is t he 1909 census figure ; no estimate For 1910 is available. total of all the capital that was invested in automobile manufacture over the entire period 1903-1926. "the general level of profits," or "average profits," at Chart 47, then, indicates the average earnings in the all accurately. Undoubtedly, the average level of these industry, as represented by most of the leading com- figures is consistently somewhat higher than would be panies, between 1910 and 1926. The solid curve is for the case if all the companies that ever engaged in auto- all companies; the broken curve, for all companies ex- motive manufacture were included. But it is probable cluding Ford. that if a curve representing all producers could be In most years prior to 1917, this group of leading drawn, it would, in its general contour, follow the curve companies earned 305 or over upon net worth, falling for the successful producers, though at some unknown under 20% in only one year (the bad year, 1911). In lower level. It is permissible to doubt whether the three of these years earnings amounted to 50% or of the unsuccessful, which Marshall suggests losses more upon capital. And never except in 1921 have net are to be subtracted from the gains of the successful, earnings fallen below 15%; never, even in 1921, has though perhaps substantial absolutely, would be large there occurred a net loss for the industry as a whole. relatively in this industry. As has been pointed out, Excluding the Ford figures, the record runs somewhat very little of capital in the industry, proportionately, lower, but, except for the deficit of 1921 (caused chiefly ever came through outside investment. The only way by a General Motors Corporation loss of $38,000,000), in which any relatively large amount of the total capi- the contour of the two curves is about the same. tal which came to be invested in automobile manufac- That contour is interesting. Ignoring year-to-year ture between 1903 and 1926 could have been dissipated fluctuations, the level of profits for all producers rose 256 THE AUTOMOBILE INDUSTRY FORTUNES OF LEADING PRODUCERS 257 66 markedly from 1911 to 1916, then fell off substantially. In the years before 1917, though oscillating greatly, earnings averaged annually about 4o%; from 1917 on, though oscillating somewhat, they have averaged only 50 about 20%. In the last year for which data are avail- able (1926), they stand at 19.8%. Profits for 1927, I and perhaps for a few years to follow, may again pos- 40 1 sibly be as high if not even somewhat higher than for I 1 1926; but it is greatly to be doubted if they will ever I ..,.1 again reach the 40% to 50% level of the period which I / ended in 1916. 3 I 4. The Nature of Profits in a New Industry I i \ : If it is to be assumed that these 9 to 15 leading firms / I are typical of the industry as a whole, the contour of 2 / I‘ this curve in a measure accords with certain accepted / I tenets of economic theory. It is not to be supposed that / I\ the earnings of a competitive trade could remain perma- 1 ) I nently at an unusually high level without additional % i producers being attracted to the field and offering sub- ■ 1 / stantially similar products at prices so low as to reduce ..... Whole Industry % -- Whole Industry, less Ford the average percentage of net return. As Marshall ili ) again remarks, "the average rates of profit in a trade cannot rise or fall much without general attention be- 1910 'II '12 '13 '14 '15 '16 'I/ '16 19 '20 '21 '22 23 ' 4 '25 '2 ing attracted to the change before long."'" Even though Chart 47: Percentage of net profits to net worth in the motor vehicle manu- demand continues to increase in both the schedule and facturing industry, 1910-1926. (Producers included: Hudson, Reo, Packard, Dodge, Nash, Willys-Overland, Pierce-Arrow, Studebaker, Ford, Buick, the market sense,'" an assumed flexibility in supply pre- Cadillac, Chevrolet, Oakland, Oldsmobile and other General Motors units.) supposes something in the way of rough adjustment of price to cost "before long." But the question of how long is of interest and im- 258 THE AUTOMOBILE INDUSTRY FORTUNES OF LEADING PRODUCERS 259 portance. Of ten the shifting of productive energies and with hardly any capital at all. And the returns on this resources cannot be accomplished, in several months reinvested capital are inextricably mixed with the re- or even in several years, in sufficient measure to satisfy turns to the managerial ability of the men who decided a new and rapidly increasing demand. Not only is to expand the businesses which they operated. These much capital fixed, much organization relatively immo- managers themselves owned most of the stock, and thus bile, but what free capital does seek investment is often most of the invested capital, for there was in these con- timid. The risks of manufacture in the automobile cerns seldom any bonded indebtedness. In striking con- industry were readily assumed by men with entrepre- trast with most modern large-scale enterprises,'" the neurial abilities, but few capitalists were found willing executives in the automobile industry were actually to venture their funds. There seems to have existed owner-managers; they were entrepreneurs in the older sufficient organizing and managerial talent, but not mo- sense of the word. The return they received thus con- bility of capital in the traditional sense. Professor Law- stituted primarily the result of their labor in organiza- rence H. Seltzer193 holds that capital was mobile with tion, of their current decisions as to what to make and respect to its diversion to the purposes of automobile on how large a scale to make it, of their willingness to manufacture because the parts makers sold on credit to devote themselves to a new and as yet risky profit the motor car manufacturers and thus gave the latter making enterprise. considerable indirect command of productive resources. Their judgment as to the future of the industry hap- But though this suggestion throws interesting light on pening to be sound beyond their fondest hopes, some the processes by which production in a new industry is of them made huge profits. But even of ter it had been attained, it does not corroborate the traditional view demonstrated, over a half-dozen years and more, that that capital is mobile in the other sense—that of readily great profits might be made in automobile manufac- flowing for direct investment towards new enterprises ture, capitalists hesitated to invest their money. The which promise substantially higher returns than the funds to finance expansion still had to come, as before, general run of businesses. out of the industry's earnings. Thus it took about a In this new industry business profits thus appear decade for the average earnings of successful automo- principally as wages of management and as compensa- bile firms to fall much below 35%. Though the series tion for risk,'" rather than as a high interest or dividend of figures here presented does not go further back than return upon capital invested. There was little or no 191o, there is evidence of high earnings on the part of outside capital invested in the automobile industry; several companies established between 1900 and 191o, there was only capital reinvested by men who started and while such earnings may not have generally pre- 26o THE AUTOMOBILE INDUSTRY FORTUNES OF LEADING PRODUCERS 261 vailed for a ten-year period prior to 1916, they did for (none of which, however, are estimated) in general all at least an eight- or nine-year period. corresponded much more closely than during the earlier By 1916-1917, however, not only had a great deal period. of capital come to be invested in the automobile indus- The fact of this correspondence hardly squares with try"° through this constant process of "ploughing the "rent theory" of business profits. If, as Francis back" earnings, but risks had greatly diminished; in A. Walker once asserted, men's differential abilities are part through the general acceptance of the automobile primarily responsible for their differential gains, then by consumers, but especially because of a much greater one would not expect to see such wide differentials as ease of manufacturing brought about by the develop- existed in the automobile industry prior to 1917 so ment of standard methods and practices and improved largely disappear in the period which follows. Even machine-tool technique. Yet automobile manufactur- with due allowance for the years 1916-1918, when the ing still appears to offer sufficient obstacles in the way country was at war and passenger car production was of "free competition" to enable earnings, a quarter of curtailed, there should occur no such equalization of the a century after the industry began, to continue upon a rate of profits as between producers if differential abil- somewhat higher level than that of the general run of ities constitute the whole or even the greater part of industries."' It may be that this fact is due, in part, the explanation of such earnings. to the "quasi-monopolistic character" of each automo- Differences in ability, of course, exist. In so far as bile manufacturer's product, which was suggested in an personal qualities determine the degree of success at- earlier chapter."' But the automobile industry ranks, tained, probably courage in undertaking the risks of nevertheless, as a competitive industry; it is as com- production on a large scale is what marked off the petitive as most industries and certainly far more com- highly successful from the slightly successful, or un- petitive than many. successful, producers. Those who had the courage to That there is clearly a tendency, however, for the put into practice certain policies before their success differentials existing between producers in this field to was assured, those who dared to discontinue the man- become narrower is shown by Charts 43 and 44. In ufacture, wholly or in part, of one kind of product while 1926, the rate of Ford profits (although this rate, to that product was still going well and paying profits, in be sure, is merely estimated) was even lower than that favor of another type because they thought the latter earned by the balance of the industry; while in 1924, would pay better, often made great fortunes. Others, 1925, and 1926 the percentage profits of that concern, once shown what to do, often could learn to do it just of Reo, Packard, Dodge, Nash, and Willys-Overland as well. But they did it only two, three, or four years 262 THE AUTOMOBILE INDUSTRY FORTUNES OF LEADING PRODUCERS 263 later, after it had proved to be commercially profitable. slide-rest . . . had not been put into practical form. But the largely conjunctural character of the great . . . There were a few rude drilling and boring ma- profits made by those who led the way in this industry chines, but no planing machines. . . . The tool equip- seems absolutely clear. The stage was all set for their ment of the machinist . . . consisted chiefly of a making. For decades, other men and other industries hammer, chisel, and file . . . the appliances for cut- had laid the foundation stones. On the production side, ting metal were little better than those of the Middle the whole machine-tool development mentioned in a Ages."10° previous chapter was available. On the market side, Industrial development always proceeds cumula- the industrial revolution which began a century and a tively, but with regard to any particular phase of its quarter before 1890-1900 had steadily swung the tastes, unfolding there is little telling when the chrysalis will the desires, the habits of thousands of people towards break. The chief preparatory stages in the evolution a higher standard of living. Especially was this true of a given industrial situation may spread over long in America, where every workman might aspire to any years. But the technical and market basis once laid, consumption level upon which he observed others. the development which follows may be rapid beyond Had an R. E. Olds, a Henry Ford, or a W. C. Durant belief. By 1890-1900, virtually all the basic machine been born in the early eighteenth century, what would tools now in use were at hand, precision instruments have been his lot? Obviously, no positive answer is and limit gauges of various sorts had appeared, and possible. But we do know that none of these men would the interchangeable system of manufacture was well have been an automobile manufacturer, nor would any developed. Some extraordinarily able and some less one of them have attained preeminence in machinery able men stepped in and utilized them, and then de- manufacture upon a large scale. The requisite basis veloped them much further. That these pioneer motor upon which such production could take place simply manufacturers made profits is due to the correctness had not then been developed. of their decisions as to the practicability of the auto- "We hardly realize," says Roe, "the crudity of the mobile; but that they made profits as large as they did tools available in the eighteenth century. In all ma- is due primarily to a conjuncture of their abilities and chinery the principal members were of wood. . . . The time, place, and circumstances. The public wanted cars; fastenings and smaller parts only were of metal, and that these men knew or suspected. Cars could be man- consisted of castings and forgings fitted by hand. There ufactured; of that they felt sure. But of the extent were some lathes of the very simple type. . . . Such to which the public would demand cars, and of the lathes were almost useless for metal cutting. . . . The extent to which manufacturing costs would be lowered 264 THE AUTOMOBILE INDUSTRY FORTUNES OF LEADING PRODUCERS 265 as the volume of production increased, and of the ex- peared entirely in a decade's time or less. Secondly, tent to which these two factors would interact, they that many of the firms which soon came to be continu- had no realization. ously successful entered the field shortly after the in- Conjoined with the circumstances that have been dustry was established. They earned profits at a rate mentioned is also the important fact that the period averaging six or seven times "normal interest" over from 1900 to 1920 was one of generally rising prices. at least a seven- or eight-year, perhaps over a ten-year, The profitable conduct of business enterprise was there- period. Thirdly, that after this eight- or ten-year fore greatly facilitated. Expansion might have been bonanza period was over, rates of profit fell off some- far more difficult, and automotive failures perhaps more what, but, on the greater part of the capital invested frequent and serious, had the general movement of in the industry, remained for another seven- or eight- prices been a downward one such as occurred from year period at a level averaging approximately five 1866 to 1897. times a "normal interest" rate. And, finally, since the To conclude, the profits of any producer in an in- recipients of these returns, for the first fifteen or six- dustry are the result of both his ability and his oppor- teen years of the industry's history,201 were for the tunities. What is the exact proportion in which these most part "owner-managers" and not merely investors, combine cannot be told. But in the automobile indus- these largely conjunctural gains seem, in spite of reg- try, it appears that conjunctural gains have bulked ular salaries drawn by these officials, to have consti- very large indeed. Like the miner who is confident tuted a mixed return upon both capital and business gold will be struck, the pioneers in motor manufacture ability. That the same small group of persons under- expected large profits. In so far as the lure of these took both the investment and the active managerial gains stimulated the assumption of production risks, functions in building up this new industry indicates they formed a part of "supply-price."200 But as in min- that the entrepreneur type of the Industrial Revolu- ing the vein actually tapped may run far deeper than tion was still functioning at the dawn of the twentieth anyone ever imagined, so in motor manufacture the century. extent of the market reached outran all expectation. To sum up the discussion of these three chapters, the data here available, though for some years very incom- plete, suggest several things. First, that in a new and rapidly developing industry such as this, many of the firms which at the outset attained prominence disap- MARKET STABILIZATION 267 curtailment of present production may possibly take place. Yet even such a curtailment, if it did occur, would probably be only temporary. The grounds upon X which these assertions rest may briefly be examined. Should no more "new" buyers whatever of automo- MARKET STABILIZATION AND biles appear—assuming for the moment what is prob- INDUSTRIAL MATURITY ably not at all true, that absolutely everyone in the United States who will own a car during the next few 1. Stabilization of Demand and the Replacement years now possesses one already—then, excepting for Market possible developments in the export market, the de- mand for cars would, of course, consist solely of pur- IF ONE examines the curve for automobile production over the entire period from 1903 to 1926, plotted as it chases to replace existing vehicles as they wear out. has been shown throughout this book, upon a logarithmic It is thus sometimes said that, were such now to be the scale or "ratio chart," he finds three distinct periods of case, next year's replacement demand would be equal growth. There is, first of all, the sharp upward climb to present registration divided by the average number from 1903 through 1916. Next is the great but pro- of years which a car lasts; for example, if over 20,000,- portionably lesser gain from 1917 through 1923. Fi- 000 cars are now registered and the average life of the nally are seen the very slight increases which have re- cars now in use is, say, seven years, then there exists sulted between 1924 and 1926. Since 1923, produc- an annual replacement demand for nearly 3,000,000 tion has more than tapered off—the new records that cars. This, however, is not true—not as yet. For by have been made represent only comparatively slight in- far the greater number of the approximately 20,000,- creases over the 1923 figure. Production has, in other 000 cars now in use are of quite recent vintage; that words, become almost stabilized at a trifle under 4,000,- is, they have been put into service just one, two, three 000 passenger cars a year. or four years ago. Eventually, replacement needs will With this apparent stabilization of demand, in the call for 3,000,000 or more cars annually, but not for at minds of many persons has come the fear of a falling least another year or two. By an ingenious method off. Yet it is difficult to find a logical basis upon which which is here described in a note,' Mr. Oscar P. Pear- any marked permanent decline is to be looked for. son, the statistician of the National Automobile Cham- Even a temporary decline of any great proportion is ber of Commerce, has calculated what the number of by no means necessarily to be expected, although some cars scrapped during the last several years has been

266 268 THE AUTOMOBILE INDUSTRY MARKET STABILIZATION 269 and his results, for 1923, 1924, 1925, and 1926 (the Thus to say just how many new cars will be called latter, in the absence of the complete 1927 registration for during the next few years is difficult if not impos- figure, is estimated), respectively, are in round num- sible. Much depends upon the country's income, upon bers as follows: 878,000, 1,146,000, 1,669,000, 1,900,- prosperity in general. Whatever the country's pros- 000. Replacement needs, then, simply on this basis, perity, it remains true that the number of new car amount in 1926 to almost 2,000,000 cars a year, and owners will not increase nearly so rapidly as it has in are, of course, constantly growing. the past. But that no more cars will be sold to "new" owners—new in either of the two legitimate senses— 2. Relation between the New Car and Used Car is inconceivable. Exact figures in this matter cannot Markets. be essayed because of the absence of information as But if to estimate present replacement demand to the distribution of current income and consumers' merely by dividing present registration by a car's aver- budgets. But while no figures upon this distribution Thousands age length of life is too optimistic a procedure, to limit of Cars it to vehicles actually scrapped might, for the next few 4,000 years at least, be somewhat too conservative a method. Even though no "new" buyers of new cars should ap- 3000 pear, many present owners of cars who have newly Automobiles acquired them during the past two or three years will 7,500 "trade in" these cars during the next year or two, Income in Dollar3 long before they are worn out. Here, then, is a "re- 000 placement" demand, but one which is not reflected in 7,000 the figures for "cars scrapped"; it constitutes a clear addition for the time being to that figure. In this case, 1, 500 the "new" owner may be the purchaser of the used car, I, 000 ..... "e"Income who, to play on words, is none the less a "new" buyer, ...... 0„..• _ 900 though the "old" owner is the one who gets the new car. It is only in consequence of thus extending the 1,000 market for cars "downward" through the used car mar- 900 ket that so many buyers of new cars are induced to 1919 r910 1921 1972 192) 1924 19/5 1916 purchase before their cars are worn out. Chart 48: National income and automobile production, 1919-1926. (Income in 1913 dollars per person gainfully employed.) 270 THE AUTOMOBILE INDUSTRY MARKET STABILIZATION 271 of the country's income in the years 1922-1926 are as ity is not meant rising prices, rampant speculation in yet available, there have just been prepared by a re- commodities, and "paper profits," but real increases in liable research body estimates as to the total amount the physical volume of production together with rea- of such income in each of these years. These figures, sonably satisfactory employment conditions such as the preliminary estimates recently disclosed by the have prevailed during the past several years. That National Bureau of Economic Research, are plotted great strides in actual economic welfare have continued in Chart 48 along with the curve of automobile pro- during a period of comparatively stabilized prices— duction for the years 1919-1926. indeed, during the last eighteen months, of actually Reduced to dollars of 1913 purchasing power, the slowly declining prices—only indicates that progress in figures indicate a growth in the country's productive new mechanical and other inventions, better productive (and therefore consumptive) capacity that is as start- organization, and improved methods of market distri- ling as it is gratifying. The current income per person bution is in general not yet over. To the extent that gainfully employed increased from $1,586 in 1922 to this progress continues the country will be able to $2,010 in 1926, which, when deflated so as to put both "afford" automobiles; a substantial number of persons figures into dollars of 1913 purchasing power, indicates in the lower ranks of the income scale may perhaps be- an increase in real income of 2170 over just this four- come buyers; a much slighter but continually increas- year „period. Granted the rough accuracy of these ing number of persons in the middle and upper ranges preliminary estimates by Dr. W. I. King and his col- of the income scale may become "dual owners"; and leagues, the general upswing in economic welfare which virtually no one will have to give up his possession of the Bureau's earlier studies of income show to have a car, whether bought on the installment plan or for taken place from 1910 to 1919 has not only continued cash. but has greatly increased its rate. It may be asked, just how does this affect the auto- 3. The Export Market mobile industry? Without necessarily subscribing to An additional factor in the demand for American Messrs. Foster and Catching's dictum203 that the auto- motor vehicles over the period of the next few years mobile industry holds the one and the only key to may be the sales of cars and trucks abroad. Although prosperity, it may be said that there can be no doubt still constituting a relatively small proportion of total as to the fact that prosperity supports the automobile sales, exports are growing rapidly. Chart 49 shows industry quite as much as the motor industry, in turn, quarterly exports of motor vehicles from 1923 through contributes to the country's welfare. And by prosper- the second quarter of 1927. While the 1926 export 272 THE AUTOMOBILE INDUSTRY MARKET STABILIZATION 273 120 development of foreign countries. That there would seem to exist a vast potential market, at least, for mo- 100 tor vehicles throughout the rest of the world is evi- denced by Charts 5o and 51, which show respectively the comparative registration of passenger cars and the 80 number of persons per motor vehicle in the United -0 States and in various other countries. One factor lim- a 60 0 iting exports at present, however, is the tariff wall .c 1— which most foreign countries have endeavored to erect

40 against the importation of American cars. On a car selling for $1,000 f.o.b. Detroit,'" this tax often amounts to several hundred dollars; in Argentina, Ja- to pan, Italy, Germany, and France it is $300 or over; in New Zealand and in Czecho-Slovakia it is $5oo or 0 1923 1924 1925 1926 1927 more, while in Austria it is $85o, or 85% of the orig- Chart 49: Quarterly exports of motor vehicles from the United States, inal price. Added to this are the high internal taxes from the first quarter of 1923 through the second quarter of 1927. which the purchaser of a car abroad must pay. Thus

figure includes only 6.5% of the total American pro- Millions of Cars o s 1.0 1.5 2.0 2.3 3.0 17.0 17.3 duction, that percentage is nearly twice as large as that for 1923. This, however, includes only the ex- United States 11.11 83.77. port of completed cars from factories located in the Canada 3.1%

United States. If to the exports of motor vehicles United Kingdom 2_77. proper there be added both the outputs of American- France 2.2 1 owned factories in Canada and foreign assemblies of American cars in other countries, the total foreign con- Australia 1.2% sumption of American vehicles in 1926 becomes 13.7% Germany 1.0%

of our total output. It amounts, in absolute numbers. Argentina .8% to 618,7r3 cars and trucks."4 Balance of World 5.3%. The extent to which American automobile exports Chart so: Registration of passenger automobiles in leading countries of the will further grow depends largely upon the economic world, 1926. MARKET STABILIZATION 274 THE AUTOMOBILE INDUSTRY 2 75 the total cost of acquiring a $1,000 American car, plus Another limiting factor is the price of gasoline the first year's registration and other fees in the for- abroad, which ranges from 27 to 70 cents a gallon. eign country, ranges from the low points of about Finally, and most important, is the lack of any great highway development in many countries. This is evi- $1,400 to $1,500 in Sweden, India, South Africa, and China, to the high points of about $2,000 to $2,500 in denced by the figures for "square miles of area to miles New Zealand, Japan, France, Germany, and Austria. of road" in various parts of the world. While in the That American cars are able to find sale in many of United States and in several European countries this these countries in competition with the foreign (there, ratio averages about 1, it runs as high as 150 and even the "home") product is indeed a striking evidence of over 300 in many Central American and South Ameri- the great productive effectiveness of the American mo- can regions. If once the ability to purchase motor tor industry. vehicles on the part of these various lands develops, 25,500 however, widespread highway construction will doubt- 25,500r U less follow—thus further stimulating motorization. But the rapidity with which this motorization may take place is, to repeat, yet unknown. It is, however, 2,430 to be noted that skepticism as to the further motori- 2:1•50 1- zation of America itself was continually expressed 1,636 1,650 I- throughout the years of the automobile's development 670 BOO I- 1111 in this country. As recently as 1922, when only io,- 000,000 cars were here registered, Mr. Alfred Reeves, 300 general manager of the National Automobile Chamber of Commerce, stated in a public address that this coun- 200 try doubtless possessed the capacity to absorb as many as 15000,000 cars, and in making this statement he believed that he was reasonably optimistic. Yet in the 100 five years that have elapsed since then, the addition to the 1922 registration figure has been just double that 0 MN II 111111 I estimate. That events abroad will take a similar course US New Au3- Ar5en- Uru- Hol- Ger- Spain brazil fgypt Japan India China Zealand trail& tints Try land many is highly doubtful; yet one dare make no sweeping statement. Chart Persons per motor vehicle in various countries of the world, 2926.

276 THE AUTOMOBILE INDUSTRY

4. The Importance of Marketing Policy In spite of these favoring conditions, however, it seems clear that with the general maturity of the in- dustry which has now come about, the bonanza days of huge profits have disappeared save for a very few producers. But it seems equally patent that wholesale disaster in no way confronts the industry as is often alleged in newspaper stories and elsewhere. Competi- Plants of the Studebaker Cor- tion will probably increase; doubtless prices, both poration, 192 7. through some curtailment of profits and through the attainment of a still greater productive effectiveness, First factory of the Ford Motor may be further lowered; and perhaps a somewhat Company, 5903, smaller number of producers will remain in business; but that a mere handful of companies will soon come to occupy the field seems quite improbable. Nor is the industry, in the writer's judgment, nearly so "overca- •! I it 1,111 ..74•JOi01■1•21.21164 First factory of the I I ud,,on pacitated" as many fear is the case. Its capacity is •0 4. Motor Car Company. 1909. merely somewhat more than ample to supply a large demand, the exact extent of which, over the period of • . the coming few years, is undetermined. Such theoreti- 1•1112-110 2/••■•••,,,, Nireefise cal estimates of a capacity of 6,000,000 to 7,500,000 Ztr& '49? cars as have sometimes been made seem to be gross 61.41 1' 4416I•VAS ' It* 4.'4eigfr4.210 e .<*944" exaggerations. If one takes even the largest actual Y:4117 ,-,',4';":;;' ';11 • '''''.;r;::.;.41;1:1/14 monthly output which has ever been registered (that oft, IL., 414. :"; 11. of 394,096 cars in October, 1925) or the largest com- eo bined car and truck output ever attained (that of the .. '0/ A composite view of the 3 plants and tog branch houses of same month) and multiplies either figure by 12, he ar- , Incorporated, 1927. rives at an annual approximation of only 4,729,152 cars, or 5,261,028 cars and trucks combined. Proper Figure 25: AUTOMOTIVE FACTORIES OF TODAY AND YESTERDAY.

277 278 THE AUTOMOBILE INDUSTRY MARKET STABILIZATION 279 allowance for the plant capacity which was added by difficult business. The product is a complicated one several large producers during 1926 would probably not to fabricate, and considerations both of quality and increase those totals by more than from 300,000 to cost under mass production conditions are equally im- 5oo,000 units. All these figures, it should be borne in portant. Furthermore, constant changes in both the mind, are the maximum theoretically possible out- technique of manufacturing methods on the one hand puts.'" None of them represent the production that is and the demands of the market on the other have been practically possible, which is a somewhat smaller figure, here the rule rather than the exception. What type of for no industry can be expected to operate constantly automobile to manufacture and when to commence its at peak load. Such "excess" capacity as the automobile production, in what price class to sell and how to dis- industry now possesses probably constitutes no greater tribute the product, and when to alter either the design percentage of the actual demand for its product than in of the car or the price range in which sales are desired, the case of many other industries."' The view that have always been difficult questions for manufacturers "cut-throat" competition and thus widespread failures to determine. lie ahead therefore seems quite unfounded. Coupled with these problems always was, and still Yet with the total market demand not growing nearly is, that of having to decide how many different chassis so rapidly as was the case prior to 1923, sales and types should be made and marketed. Just as a proper profits for all concerns in the industry can hardly con- balance has to be sought between a policy of making tinue to increase as has been the case in the past. But changes in the product either so drastically as to invite progressive producers will not tamely submit to even manufacturing chaos and high production costs on the a falling off of their growth. Previously, nearly all one hand, and that of improving the product so slowly, companies could grow; although they did not all grow on the other hand, that sales lag—so likewise must the at the same rate, they grew simultaneously. Now, the right balance be struck between making too few and one may possibly be able to continue his growth only making too many chassis types and body styles. Those at the expense of the other. Which firms, it may be manufacturers who have succeeded, and who will fur- asked, will thus continue, relatively speaking, to rise ther succeed, are those who have best approximated and which to fall? these two sets of "balance points" and have taken cog- Those firms will survive which best preserve an in- nizance of changing conditions without allowing them- telligent balance between production and marketing selves to be overcome by them. conditions. Automobile manufacture, as has been Now that the expansion of one firm, if it occurs upon shown in previous chapters, has always been at best a any very considerable scale, must come largely at the 28o THE AUTOMOBILE INDUSTRY MARKET STABILIZATION 281 expense of another or several others, a particular pro- plant means higher unit costs, and unless total volume ducer can continue to enlarge his annual production can be increased in such a ratio as to cause compensa- only in two ways. He may, through much experi- tion for the loss of certain productive economies by the mental work and superior engineering and designing attainment of others, a net loss rather than a gain may skill, produce a car that clearly eclipses in both per- result. The evidence of a past period points to an formance and appearance the products of his competi- overemphasis upon productive economies and the neg- tors, or he may endeavor to cut into their market by lect of market factors by many leading producers, bringing out additional models to compete with pro- while the present situation apparently points to just ducers in other price ranges than his traditional class. the reverse situation, a frenzied pursuit of the market The first thing—to produce a surpassingly better to the apparent neglect of productive considerations. car—is now the more difficult to accomplish. It has This has not, however, been true of the Ford Com- been done by two or three companies in the past few pany. It recently went to the other extreme. For 15 years, but only by these two or three. Productive con- years, from 1908 to 1923, the Ford Motor Company ditions have become so relatively standardized, the was undisputed champion of the automotive field. Dur- technique of car manufacture is so well understood, ing these 15 years it succeeded in retaining its preemi- engine and running gear construction are now compar- nence without making any basic change in the charac- atively so far advanced, that it takes little short of ter of its product. But between 1923 and 1926, the genius to produce a car that is clearly the superior of Chevrolet, Overland, Star, and Essex companies suc- others in its price class by a margin much more tang- ceeded in supplying cars which, while also small and ible than may exist in the minds of the writers of sturdy in construction, were of a different design in advertising copy. several important respects; and to these producers the To make the second effort—to try to expand sales market soon turned. The Ford production still re- —is far easier. No order of genius is now required to mained an enormous one, measured in absolute figures, build a smaller or larger model and add it to an exist- but during the five or six years ending in 1926 the ing line, and this any number of producers have done curve denoting its annual growth virtually "flattened within the last two years. It is, logically, merely an out," and in 1924 and 1926 the Ford sales figures reg- expression of the coming struggle to keep total sales istered absolute decreases as compared with those of volume growing. But though easy to inaugurate, this 1923 and 1925, respectively. The figure for 1926 stood policy, too, has its dangers. Every experienced manu- at a lower level than that of any year since 1922. facturer knows that to make more models in the same Chart 52 shows annual Ford and Chevrolet produc- 282 THE AUTOMOBILE INDUSTRY MARKET STABILIZATION 283 2,0 oo cars of all makes now on the market undoubtedly af- 1,5 00 ...... 4 Ford fected Ford sales in substantial degree. Instead of buy-

ro"...... ing Fords, many persons with $35o to $600 to spend I .0 o o 900 within the past two or three years have purchased the 800 other types of used cars which have been available in 12 700 large numbers, and in serviceable condition, at these .••• 00'. low prices. Lastly, in the list of extenuating circum- ...... 0.° stances affecting Ford sales in 1925 and 1926 is the I 4 0 o • 01°." .4%.4.14., 0 ./.. -r6 "■■■ ... ooe. '...° fact that the last two years have been a period of such FE Soo No/ pronounced general prosperity that a number of other- ,/ Chevrolet wise potential buyers of new Fords decided to spend 200 an additional $150 or $200 and purchase the products of Chevrolet, Essex, Star, and other companies instead. Yet while all these three factors—the general stab- 0 10 ilization of the industry, the comparative plethora of 192 2 1923 19'14 1925 1926 used cars, and the recent high level of general prosper- Chart 52: Production of Ford and Chevrolet passenger cars, 0922-5926. ity—are important, they account for the Ford decline tion for the years 1922-1926. In a measure, both the only in part. Clearly coupled with these external con- comparative and the absolute loss of sales by the Ford tracting factors has operated an internal cause—the company over the past few years is due to factors other design and construction of the Ford car itself. From than merely those involving the design of its product. 1908 to 1927 hardly an improvement in design was As has been previously pointed out, the curve of total made. Except for a vastly better quality of materials passenger car production — for all makes taken to- (which all makes of cars have enjoyed as the result of gether—has shown a general "tapering off" tendency great advances in metallurigical science), the fifteen- as regards the rate of its growth, since about 1916. millionth Model T Ford chassis, produced in 1927, was From one point of view, the much larger relative de- identically the same type of chassis as that which rolled cline in Ford sales for the last few years may consti- out of the Piquette Street plant in 1908 when this tute merely one reflex of this general slackening in the model was first announced. rate of expansion. Also, and as a corollary of the gen- It is true that this very policy underlies the aston- eral situation, the greatly increased number of used ishing success that has been Ford's; it is irrefutable 284 THE AUTOMOBILE INDUSTRY MARKET STABILIZATION 285 that a policy of never changing design but ever lower- uct to the demands of the mass of its consumers is the ing selling price resulted in productive economies of the complementary necessity without which industrial lead- greatest magnitude. But, like any single principle of ership cannot be long maintained. In no industry may action alone followed, such a policy can remain too the principle of balance, to employ Mr. A. W. Shaw's fixed, can become too rigid and unyielding a part of a apt phrase, be ignored with impunity, and the history business creed. To make cars at low cost is one thing; of the automobile industry has often afforded a strik- to make cars that consumers want is another. While ing illustration of the consequences which attend its in the Ford case, certain other factors just mentioned neglect. The Ford company constitutes only the latest have operated, there can be no doubt in the minds of instance which offers itself. Whether or not the error most observers that many of the buyers of second-hand can yet be corrected in this case, whether or not the cars, and some of the buyers of the Chevrolet and the new model which is now being brought out will regain Essex, during the last two or three years would have for the Ford company its proud position as the undis- bought the Ford instead, had only its design been dif- puted leader of the automotive field, is, however, a ferent. Another type of transmission, other springs, matter which, like many other things in a world of other lesser details of construction—all these things, it constantly changing economic conditions, must remain has been well known for several years, were desired by for future observation. an increasingly large proportion of the automotive pub- lic. Yet, until now, the Ford. company paid no heed. Like the eight leaders of 1903 whose history was above discussed, it persistently clung to a type of product from which consumers were turning away. With all willingness to grant credit for splendid and prolonged earlier achievements, one cannot but affirm that the all-important principle of balance between marketing and productive considerations has here been disre- garded. For manufacturing proficiency, though both essential to success and difficult of attainment, is of little avail unless accompanied by sagacious market analysis. Supplying a product is but one side of man- ufacture in its full economic sense; suiting that prod- NOTES

The abbreviation N.A.C.C. refers to the annual statistical pub- lication of the National Automobile Chamber of Commerce entitled Facts and Figures of the Automobile Industry. A proper name cited as a source of information, e.g., "Olds," or "Willys," refers to an interview with one of the several indi- viduals whose full names and positions are given in the list which appears in Appendix B (pages 329-333).

CHAPTER I 1. N.A.C.C., 1925, p. 4. The figure rests upon an examination of census and other data by Mr. 0. P. Pearson. 2. Duryea, Olds, and Haynes seem to have been first; Alexander Winton, Charles B. King, and Henry Ford soon followed; George B. Selden, though famous for his patent first filed in 1879, never built a car until 1905, and did so then only for purposes of exhibiting in court the subject of his patent. For further reference to Selden and the results of his patent see Chapter VIII. 3. N.A.C.C., 1927, p. 12. 4. N.A.C.C., 1927, p. II, gives $3,371,855,805 as the 1925 wholesale value of the automobile industry's product, the source for this figure being the Census of Manufactures for that year. 5. N.A.C.C., 1927, p. 36, gives the figure 4,528,422 as of December 31, 1926. 6. The Gunn figures (under the name of the United States Rubber Company stated as the source of the data) are cited in N.A.C.C., 1921, p. 16. They are as of 1921. N.A.C.C., 1927, p. 15, cites later figures compiled by R. L. Polk Company which show that as of Decem- ber 31, 1926, 28% of total passenger car registration was in towns of under 1,000 and 47% of the total in towns of under 5,00o. The reg- istration of trucks, based on data compiled by the same company but not reprinted in the source mentioned, shows, as of December 31, 1926, 24% in towns of under ',Doc, and 42% in towns of under 5,000. 7. H. R. Tolley and L. M. Church, Corn-Belt Farmers' Experience 287 288 THE AUTOMOBILE INDUSTRY NOTES 289 with Motor Trucks, United States Department of Agriculture, Bulletin 18. It is doubtless true, however, that in some instances the cost No. 931, February 25, 1921. of medical attention still deters the rural population from using the 8. Compiled from the frequency distribution given on page rg of physician's services as frequently as does the city dweller. the Department of Agriculture Bulletin No. 931, previously cited. 19. N.A.C.C., 1924, pp. 26-27. For a statement of the role of the 9. Report made October 15, 1921; cited in Relation of Highways truck in terminal areas, November 2, 1923, see Relation of Highways and Motor Transport to Other Transportation Agencies, Report of and Motor Transport to Other Transportation Agencies, Report of Special Committee IV of the Chamber of Commerce of the United Special Committee VI of Chamber of Commerce of the United States. States, Washington, November 2, 1923. 20. G. C. Woodward, general freight agent of the New York Central Io. There are about 6,500,000 farmers in the United States, and Railroad Company, in an address delivered in New York at the Motor in 1926 there were 499,782 farm-owned trucks. The distribution of Truck Convention of the National Automobile Chamber of Commerce, farm-owned trucks by states is given in N.A.C.C., 1927, p. 36, in a January 5, 1925. Published in pamphlet form. table for which figures are taken from the Farm Journal. 21. 39 Stat.,- 355, approved July II, 1916. Printed in Circular No. 11. A total of 984 motor express companies is actually listed in the 65, Office of the Secretary, Department of Agriculture. files of the National Automobile Chamber of Commerce. In 1922, 22. American Section of the International Chamber of Commerce. that organization estimated the total number in existence to be 1,5oo. Report of the American Committee on Highway Transport, June, 1925. As of 1927, the number is undoubtedly 2,00o and perhaps as high as 3,000. 23. Public, No. 244, 67th Congress, approved June IQ, 1922. Printed in Circular No. 161, Office of the Secretary, Department of Agriculture. 12. American Section of the International Chamber of Commerce, Report of the American Committee on Highway Transport, June, 1925, 24. N.A.C.C., 1927, pp. 25-26. P. 5. 25. In conversation with the writer, in January, 1927, at Washing- 13. J. M. McKee, Annals of the American Academy of Political and ton. Social Science, November, 1924, p. 16. 26. Report, International Chamber, op. cit., p. 10. 14. legislature, in 1867, authorized the consolida- 27. Frank B. Brimmer, "Nomadic America's $3,300,000,000 Mar- tion of district schools, and in 1869 authorized school trustees to meet ket," The Magazine of Business, July, 1927, p. 18. the cost of transportation of pupils. The towns of Greenfield, Quincy, 28. The Rise of American Civilization (New York: The Macmillan Montague, and Concord all effected at least a partial consolidation by Company, 1927), Vol. II, p. 4. 1887. See Consolidation of Schools and Transportation of Pupils at Public Expense, Bulletin No. 6, Department of Education of Massa- CHAPTER II chusetts, 1920; cited in LeRoy A. King, Annals of the American Academy of Political and Social Science, November, 1924, p. 6g. 29. Samuel Smiles, Boulton and Watt, p. 114; quoted in J. W. Roe, 15. J. F. Abel, Consolidation of Schools and Transportation of English and American Tool Builders (New Haven: Yale University Pupils, Bulletin No. 41, United States Bureau of Education, 1923. Press, 1916), p. 2. Cited by King, op. cit., p. 73. The number 12,000 as of 1923 has since 3o. Samuel Smiles, Boulton and Watt, p. 186; quoted in Roe, op. cit. then increased substantially. 31. E. W. Byrn, The Progress of Inventions in the loth Century, 16. N.A.C.C., 1924, p. 32. New York: D. Van Nostrand and Company, Igo!. 17. N.A.C.C., 1927, p. 78. Most of the "school busses" enumerated 32. One coach actually carried as many as 3,000 passengers before are in use in rural districts and in small towns. the service was discontinued. But because of the opposition of vested 29c) THE AUTOMOBILE INDUSTRY NOTES 291 interests and the popular fear that the roads would be damaged and 43. See especially Chapter IX, section 4. horses annoyed, these early steam carriages were quickly legislated out 44. See Chapter V, section 2. of existence by the imposition of high taxes. There is, however, some evidence that they were mechanically and commercially practical. 45. On the "mobility" of capital in this connection see a University of Michigan doctoral thesis by Lawrence H. Seltzer entitled "Capital Telford and other engineers testified, before a Select Committee in in the Automobile Industry," p. 49, an excellent monograph which has 1831, that their weight would not result in harm to road surfaces. just been awarded the Hart, Schaffner and Marx prize and will soon See William T. Jackman, The Development of Transportation in Mod- be published in book form by Houghton, Mifflin and Company. ern England, New York: G. P. Putnam's Sons, 1916. Though the automobile manufacturer obtained command of the re- 33. The various names and statements made in this section are sources necessary for production of vehicles in this manner-through derived from a number of different sources; all these authorities are having the parts makers devote their facilities to the turning out of cited in an article by the present writer, "Industrial Invention: Heroic engine parts, axles, and so on-there was no substantial actual invest- or Systematic?" Quarterly Journal of Economics, February, 1926. ment of outside capital in the automobile industry proper. While I 34. Apparently because of both the dangers of operation and the have not yet investigated the situation so thoroughly and in so many difficulties of maintenance, steam vehicles soon lost in public favor quarters as I should like, I am convinced that there was virtually no and their manufacture was discontinued by all but a few firms; one mobility of funds in the sense of their having been withdrawn from firm only remained for any length of time in the field of steam-car one industry and put into another. manufacture after about 1908-1o. Electric passenger cars remained 46. Often of these complete assemblies; for example, a whole engine, in slight favor for a considerable time, but of recent years have dis- rear axle, or gear set. appeared from the road almost entirely; none are any longer being 47• C. M. Burton, The City of Detroit (Chicago: Clark Publishing manufactured. Company, 1922), Vol. I, p. 356. 35• This is probably the only sense in which the word "invention" 48. ordinarily means much anyhow. In a volume to follow the present See the various articles in the "Standardization Number" of the Journal of the Society of Automotive Engineers, work, I hope to be able to carry this discussion much farther. With December, 1921; also, an excellent popular article by J. K. Barnes, "The Men Who respect to the general theory of invention, see the above mentioned `Standardized' Automobile Parts," World's Work, June, 1921. paper in the Quarterly Journal of Economics, February, 1926. 49. See below, Chapter III, section 5. 36. Henry Ford, in collaboration with Samuel Crowther, My Life and Work (Garden City: Doubleday, Page and Company, 1925), p. 31. 5o. It is not here implied that in most cases any close correspond- ence between price and cost existed or that all producers shared alike 37. The evidence which I have thus obtained indicates that Duryea's in the cost reductions; only that prices and costs, through affecting vehicle probably was the first American car employing an internal the scale of production, reacted upon each other and that, in general, combustion motor. greatly lowered costs of manufacture did result in substantially lower 38. See Dexter Kimball, Principles of Industrial Organization, New prices to the consumer. York: McGraw-Hill Book Company, Inc., 1925. 51. "Workers, Machinery, and Production in the Automobile Indus- 39. Roe, op. cit., p. 31. try," Monthly Labor Review, October, 5924. 4o. C. H. Fitch, Report on the Manufacture of Fire-Arms and Am- 52. I am indebted to Mr. Howard Einstein, a consulting industrial munition, Extra Census Bulletin, 1882, pp. 2-5. engineer of Detroit, for the elaboration of this explanation. 41. Their various works are described in detail in Roe, op. cit. 53. "Man hour" figures, for any one establishment, include only 42. England led in developing machine tools from 1775 to 1850; "present labor," not, in the phraseology of economic theory, "past and America has led since about that date. present labor combined." Furthermore, along with the increased use 292 THE AUTOMOBILE INDUSTRY NOTES 293

of machinery has come, also, the production of a greater number of no good basis for selecting one range in this series rather than another. chassis parts within the individual establishment. Thus the recent But the trade has recognized from time to time the existence of various reduction of "man hours" which the mechanization of processes within price groups, and during any year there are points about which the all automobile manufacturing enterprises would have entailed has been cars of similar size and quality cluster; there is now, for example, somewhat offset by the employment of more men for the internal clearly a $600-800 class, a $2,500 class, and so on. fabrication of parts. But whatever the net resultant of the several 63. See Chapter X, section 4. factors at work, the effectiveness of labor has clearly here been multi- plied enormously. 64. "Averaging" in the sense of seldom diverging from a smooth line of trend which could be drawn, for the period as a whole, through 54. La Fevre, op. cit., pp. 3-4. "Establishment B," shown here, is the curve actually plotted. designated in La Fevre as "Establishment C." 65. See Chapter II, above. 55. Issue of November 24, 1904. 66. 56. Motor World, February 12, 1903. These are the percentage deviations of the Harvard Index of Trade, which for the years 1903-15 is composed of figures for the following items: bank clearings outside New York City, merchandise CHAPTER III imports, gross earnings of leading railroads, pig iron production, and 57. The motor truck will not be treated specifically in this chapter. volume of industrial employment. The index is given in the Review The real development of truck manufacture began after that of the of Economic Statistics, preliminary volume V, p. 75. passenger car industry, of which the truck was, technically speaking, 67. This was in April, according to the Harvard Index of Trade in an outgrowth; and the rapid extension of the market for trucks has the Review of Economic Statistics, just cited. The American Tele- taken place upon much the same basis as that which has characterized graph and Telephone Index of General Business Activity shows a the introduction of several other important labor-saving devices in maximum decline of only 3%. The figures for this latter index I industry or commerce. have taken from the table reprinted in Homer B. Vanderblue, Prob- 58. Motor World, January 26, 1905, p. 863. lems in Business Economics (Chicago: A. W. Shaw Company, 1924), p. 603. 59. See Chapter V, section 4. 68. 6o. M. T. Copeland, Principles of Marketing (Chicago: A. W. The financial problems which one concern, the General Motors Shaw Company, 1924), p. 14. Thy same statement appears also on Company, faced and met are admirably treated in Seltzer, op. cit. p. 103. (Note 45). 61. By "the Marshallian view" I mean that theory, most fully 69. I have drawn no distinction between production and sales figures. formulated by Alfred Marshall in his Principles of Economics (1st There is, of course, some "carry over" of cars each year, but over a edition, London: Macmillan and Company, 1890), which holds that period of years the two figures coincide. normal price (value) depends upon the interaction of utility and cost 70. Harvard Index of Trade, previously cited (Note 66). (marginal cost, if present) of production. By the Austrian view, I 71. Ibid. mean the several doctrines of Menger, Wieser, and Jevons, succinctly stated more recently by Bohm-Bawerk in his Positive Theory of 72. For production growth from 1917-26, See Chart 13, p. 103. Capital (1923 reprint, G. E. Stechert and Company, New York), 73. In the following discussion we may neglect, for the most part, that price (value) depends predominantly upon final (marginal) degree year-to-year "carry over" and employ the terms "production" and of utility. "sales" synonomously. 62. There is, of course, a gradation in the prices of different makes 74. Cf. Chapter VI, section r; also Note 127, below. if these be arranged in a series, and mathematically there may seem THE AUTOMOBILE INDUSTRY 294 NOTES 295

75. The data upon which this study is based include the production 83. From data charted by Leonard P. Ayres in the Cleveland Trust figures of virtually every concern which has ever engaged in automobile Company Business Bulletin, October 15, 1924, and from additional production in this country, nearly zoo in all. Because many of the data furnished by him relating to Firestone casings. figures were furnished to me in confidence, I am unable to give indi- vidual figures, but here chart, and present in the appendix, only the 84. Page 75. percentages. For some years, however, there exist certain discrep- 85. See above, page 74. ancies between the total number of cars which I have classified and 86. As indicated by Dun's, Bradstreet's and the Bureau of Labor the total published production for the entire industry. I do not believe, Statistics' index numbers. however, that these discrepancies, if they could be corrected, would at all affect the trends which are disclosed, and Mr. 0. P. Pearson, statis- 87. I have also calculated replacement demand by starting with the tician of the National Automobile Chamber of Commerce, and several number of cars put into service prior to and during the year 1912; other friends who have examined the figures share this belief. For the the result comes to about the same thing. For a fuller explanation nature of these discrepancies, as well as for an explanation of the of replacement demand and the method of computation, see Leonard method of compilation, see Appendix B, pages 335-337. P. Ayres, The Autombbile Industry and Its Future, Cleveland Trust Company pamphlet, 1921. The assumption I have here made is that 76. This chart, as well as several charts which follow, differs some- a high-priced car was, on the average, replaced by a new car after what from the charts covering similar data which I presented in the four years of service at the hands of its original owner. Thus a car January, 1927. The reasons for the dis- Harvard Business Review, that was produced. in 1908 is assumed to have been replaced (traded crepancies are several, but chief among them is the fact that the Ford in or otherwise disposed of in favor of a new vehicle of the same calendar year (instead of fiscal year) figures have come into my general price class) at the end of 191 1. The table finally arrived at possession since that time. All charts have been redrawn so as to upon this basis (see Colonel Ayres' monograph for a detailed descrip- incorporate these and other lesser corrections which it has been found tion of the method) is as follows. possible to make. The exact percentage figures for the data here considered are 77. Produced Eliminated In Use at Replace- given in Appendix B, page 336. Year Carried During During End of ment 78. Motor World, May II, 1905, p. 337. Over Year Year Year Demand

79. See below, Section 6. 1912 73,913 17,533 7,471 83,975 21,000 1913 I say "after roll" rather than "after 191o" because I am 83,9%5 20,086 29,939 74,122 18,500 80. 74,122 not certain that the proportion of cars shown in Chart 6 as selling 1914 17,997 17,997 74,122 18,500 1915 74,122 15,287 18,506 70,903 17,700 below $1,375 in 1911 is entirely accurate, whereas the percentages 1916 70,903 16,488 17,533 66,858 17,5o0 shown for 1912 and 1913 probably are correct. See Note 75 and also Appendix B, page 336. 88. Though certain qualifications may attach to some parts of the 81. In 1914, our per capita income was $335, in contrast with the data presented in these pages (see Appendix B), the sales figures for following figures for other countries: $243, United Kingdom; $146, the years here in question are believed to be quite reliable. Total Germany; $185, France; $112, Italy. National Bureau of Economic production for the years 1912-1916 inclusive was 3,703,000 cars, while Research, Income in the United States, by Wesley C. Mitchell and our total sales figure for all price classes of cars during the same period others, p. 85. was 3,668,000 cars. 82. Using "operation" not in any accounting sense, but to include 89. See Chapter VI, section 5, and Chapter IX; see also Note 5o, all normal charges other than those due to breakdowns. above. 296 THE AUTOMOBILE INDUSTRY NOTES 297

CHAPTER IV 98. These statements are based primarily upon the results of a questionnaire sent in 1926 to all manufacturers by the writer with 90. The expansion of the export market is discussed in Chapter X, the cooperation of the National Automobile Chamber of Commerce. section 3. 99. As will appear shortly in the discussion, both wholesalers and 91. Coleman's patents are many. The earlier applications include branch houses always sell cars at retail also, in some portion of the one for an air starter, filed in 1903 (Serial No. 176,165) and one for local market. a spring starter, filed in 1904 (Serial No. 216,913). On Kettering's Too. Olds. work, the popular article by W. A. P. John in Motor for August, 1921, is of interest. Ica. Everitt. 92. All figures cited in this section are taken, unless otherwise noted, 502. Chapin. from information and bulletins furnished the writer by C. C. Hanch, 503. Olds, Willys. secretary and general manager of the National Association of Finance 104. Metzger. Companies, and from a paper by Milan V. Ayres, analyst of that or- 505. See William A. Grimes, ganization, "Installment Selling and Its Financing," Third Automotive Financing Automobile Sales (Chicago Trust Company Prize Monograph; Chicago: A. W. Shaw Company, Financing Conference, National Association of Finance Companies, 1927), p. 22. The details of wholesale financing operations are well Chicago, November 15-16, 1926. discussed in that book. 93. The new car figure is for the year 1926; the exact used car To6. Grimes, op. p. 26. figure is not available. cit., 107. I am indebted to Mr. Charles C. Parlin, of the Curtis Pub- 94. "Safety Zone in Automobile Financing," in Automobile Time lishing Company, for furnishing me with these, as well as some earlier Payments, Bulletin of National Automobile Dealers' Association, 1926, figures. All the figures are drawn from issues of that company's publi- p. 16. cation, Leading Advertisers, for various years. 95. Such is the conclusion of a prominent finance company official To8. The only exception I know to this statement is a brief adver- who has personally investigated the situation rather widely. tisement which I once saw in a newspaper in a small city; the dealer 96. The Cadillac Company, in advertising its new LaSalle car, priced had given up his franchise and was attempting quickly to dispose of at about $2,500-$3,000, even calls attention to the exact amounts of cars he still had on hand. the down payments needed to give the buyer delivery of its various 509. The chief exceptions to this statement are certain instances in models. which particular makes or models of car have been discontinued, and CHAPTER V it was desired to close out the stock on hand. 97. The reasons for this localization are not entirely clear. In To. Of late, however, the stringency of such control and advice has the very early days—from 5900 to 1905 or 5906—a number of auto- been much relaxed by certain companies, one or two of which have mobile factories were in New England. But most of them disappeared even subsidized the dealer on "trade-ins" to help him make the sales. soon afterwards—nearly all of them by about T912-14. The reasons TH. In either the companion volume to this book or in some other for the marked localization around Detroit as usually given are the publication, I hope possibly to discuss them. As to how much can be done proximity of raw materials, the fact that some of the early experi- with these problems I am not at all certain. The matter is, of course, menters were located there, and also that Detroit has always been a complex one; it relates also to the considerations that were raised, "an open-shop town." None of these reasons alone, however, serves as but, again, not fully discussed, here in Chapter III, Section 2. Briefly, an adequate explanation, although combined they of course have a the thought which I have in mind is the by no means wholly original certain weight. The entire matter will be discussed further in another one that neither "free competition" (whatever the economic theorist volume. 298 THE AUTOMOBILE INDUSTRY NOTES 299 may ordinarily mean by that phrase) nor "monopoly" obtains over 121. The platform spring, which exercised a steadying effect upon the greater part of the industrial field today. But what I have fur- the motion of the frame and body, came to enjoy a considerable vogue ther in mind is that the actual state of affairs cannot be accurately for some years immediately following this, especially on large and described by saying either that "competition is merely checked" or medium-sized cars. that "monopoly is incomplete." What really prevails in many if not 122. Clough, op. cit., p. 143. most industries is a (now) quite normal state of "tempered" or even "cooperative" competition—the production of more or less similar 523. Horseless Age, July 21, 1909, p. 57. goods and services by several producers, sold against each other at 124. Motor World, July 23, 1903. not quite uniform prices, which prices are sometimes subject to more 125. Ibid., August 27, 1903. or less rapid alteration, but with modifications, both of price and of production schedules, often accompanied by notice to competitors, CHAPTER VI and often with some regard for the "ethics" of the situation as among members of the dealer organization. How much or how little the 526. Alfred Marshall, Principles of Economics, p. 414 (First ed. careful study of commercial practices and conditions such as these in 1890. Marshall adds that these are, however, "eddies on the surface particular industries would contribute towards a modification (either of a great tide. Such eddies will always exist, and occasionally play the verification or the disproof) of certain parts of the theory of an important part in the history of a particular trade." To charac- value and price is an open question. But it would seem that some terize these incidents as mere eddies is, I think, greatly to understate such examinations of these matters might at least be undertaken, their importance for purposes of general economic analysis; but I admittedly difficult as is the task if it really aims at more than the shall not attempt to discuss this matter in these chapters. mere description of business practices. 127. The March, 1909, issue of the magazine Motor, for example, contains a list of 639 firms that "engaged" in business up to that year. 112. An outline of racing history is to be found in C. G. Sinsabaugh, Similarly, Mr. 0. P. Pearson, the statistician of the National Auto- "The Melting Pot of Design," Automobile Trade Journal, December mobile Chamber of Commerce, has compiled data which suggests that I, 1924, pp. 225-232. Details of both races and reliability contests an even greater number of companies than this have been organized, may be obtained from contemporary accounts in most of the trade and he has very kindly permitted me to examine the data of his re- journals. searches. But, as will immediately be pointed out in our text, he has 113. Ford and Crowther, op. cit., p. 50. no way of knowing the extent to which many of these firms actually 114. The Horseltss Age for the half-year July-December, 1904, lists "engaged" in business upon a commercial scale. ___∎ six reliability, endurance, or hill-climbing contests, and twelve racing 128. The number really becomes 43 instead of 44 if corporate units events, and its subsequent volumes list still larger numbers. Lrather than "lines of cars" be counted, as the Chrysler Corporation 115. A national federation of local motor clubs. now makes cars which, in 1925, succeeded the Maxwell. The Max- well name was in that year dropped, and the Maxwell Corporation 116. Horseless Age, August 9, 1905, p. 206. passed out of existence. Yet, as will appear immediately in the dis- 117. George Otis Draper, in the Horseless Age, July 26, 5905, p. cussion in the text, the changing of the Maxwell name in 1925 to 153- "Chrysler" should not be counted in any sense as an automotive failure, for there was no failure at all; the company was, and 118. Including half of the 1905 production. The time we are con- the present line of cars which it makes now is, very successful. sidering is July, 1905. 129. The term quartile is explained in Chapter VII, Section z; 119. Horseless Age, July 14, 1909, p. 49. briefly, it means that figure, in a statistical series, which stands one- 120. "Technical Contributions from the Contests," Horseless Age, fourth of the distance "down" and three-fourths of the way "up" from August I, 1906, p. 143. either extreme of the array. NOTES 300 THE AUTOMOBILE INDUSTRY 301 CHAPTER VII 13o. There have been wide variations in expenses as between pro- ducers, but for all producers the growth of the industry has been ac- 144. See section 5, below. companied by both external and internal economies. In the termi- 145. During and since the World War. nology of the current value theory, returns have been neither con- 146. stant nor diminishing; as of any given time they have varied; but At least, the first American car. in the long run, decreasing cost has prevailed in striking fashion. 147. As in preceding sections, this method of measuring the stand- 131. It will be recalled that this Census, from 1899-1919, was issued ing of manufacturers makes no allowance for variations in the size, price, or quality of vehicle produced, but it is the simplest and per- only quinquennially, not biennially as at present. haps the best single measure that can be employed. It is also obvious 132. The Olds Motor Works notably, making a $650 car, the that to be one of the first io producers in 1903 meant something less famous "Curved-dash" Oldsmobile, had just convinced several thou- than to be one now. This is true both absolutely and relatively. The sand purchasers that the horseless carriage was a practicable road median producer in 1903 made barely zoo cars a year; the leading vehicle, and in 1904, largely as a result of the Olds success, a greatly producer made only 4,000. The tenth producer in that year, in a list increased number of purchasers seem to have entered the market. totaling 24 firms, stood only slightly above the median of the series. 133. The near failure of the General Motors Company in that year, In the years that followed, however, the number of firms increased. following a too great expansion of production in 1909 and 19ro, led In 191o, the tenth producer stood at about the first quartile; in the to serious difficulties of a cyclical character (loosely, "cyclical" in years 1909-1916, in general, roughly midway between the top firm the special sense of a particular industry's own "business cycle") on and the first quartile; in 1921, at about the first decile; and in 1924 the part of most producers in 1910 and 1911. In addition, the demand somewhat higher still. Because of the character of the data for the for high-priced cars in those years underwent a decline, which will be years since 1916, however, only the first io firms in any year have discussed below. been here considered. 134. See Chapter III. 148. See Chapter III. 149. 135. See Chapter III, section 6. As has been elsewhere stated, the Ford Company made a heavy six-cylinder car in 1907 and discontinued it the following year. 136. See Chapter V, section 5. 137. Seltzer, op. cit., p. 153, citing Mr. A. B. C. Hardy, formerly CHAPTER VIII president of the Olds Motor Works and one-time assistant to Mr. 15o. The number of cars produced is here again utilized as the Durant. The citation of Durant's remarks rests upon the quotation index to a firm's size, even though it takes no cognizance of the quality of them by Mr. Hardy, which is substantially, although not exactly, of product made, nor of its value. There are, however, great difficul- verbatim. ties in the way of weighting production figures in accordance with 138. See Chapter II, section 6. variations in size and types of cars. See Note 147. 139. George W. Dunham, "S. A. E. Standardization," Journal of 151. See Chart 4, page 66. the Society of Automotive Engineers, Vol. IX, No. 6, December, 1921. 152. More accurately in some cases, per company, though up to 14o. See Chapter II, section 6. 1916 nearly all the companies operated but one main works. 141. B. B. Bachman, "S. A. E. Standards," in the Journal of the 153. Durant Motors, Inc., recently formed, did not combine com- Society of Automotive Engineers, Vol. IX, No. 6, December, 1921. peting producers, but initiated several entirely new lines of cars. 142. B. B. Bachman, loc. cit. 154. Figures from 5909 to 1924 are taken from Seltzer, op. cit., Table 5o, who had them compiled from the books of the company; 143. Eighty entrances as compared with 49 exits. 302 THE AUTOMOBILE INDUSTRY NOTES 303 those for 1925 and 1926 are computed from the corporation's an- 164. 172 Federal 934. nual reports. By "net worth" here and in discussions which follow 165. Called in the contract the Columbia and Electric Vehicle Com- I mean the total of assets (excluding good will and patents) minus pany; but both the parent concern and its affiliated companies were all liabilities to other than security holders. Surplus, undivided profits, usually spoken of in the trade and in litigation proceedings as simply and contingent reserves are thus considered, along with all stock the "Electric Vehicle Company." equities and, where they occur, with bonded debts, as constituting a 166. 104 Federal 814-16. part of the invested capital and, in our sense of the term, of the net worth of the concern as a business enterprise. Cf. what is said in 167. Electric Vehicle Company et al. vs. A. C. Duerr & Company Appendix B in connection with the sources of Charts 42-45, below. et al., 172 Fed. 923. 155. From an unpublished History of Maxwell Organization, 1904- 168. This estimate rests on the wholesale sales figures of the books 1921, by J. C. Holmes. This manuscript is placed in my hands by of the A.L.A.M. To these figures for the wholesale value of mem- the courtesy of Mr. Holmes, who is assistant comptroller of the bers' and licensees' production I have applied the percentages of Chrysler Corporation, the company which has inherited the Maxwell IA% and 8/10 of i% for the periods 1903-6 and 1907-10 respec- records. tively. The year 1911 is not included; the A.L.A.M. was disbanded in that year. Nor are sales of importers of foreign cars (who also 156. Following the crisis of 1920, the Maxwell Company merged paid a royalty) included. The amount of these latter sales, however, with the Chalmers Motor Company and more recently has become the is insignificant in comparison with the total. present successful Chrysler Corporation. 169. The following dialogue, representing testimony given on the 157. It no longer remains, strictly speaking. In 1925, the Maxwell witness stand by Mr. William E. Metzger in March, 1906, well sets name was completely dropped, and the name Chrysler "Four" been forth what seems actually to have been the association's policy with given to the car marketed in its place. See Note 128. respect to both output and the admission of new members (from 158. The Selden patent association (the "Association of Licensed Selden Case Record, Vol. III): Automobile Manufacturers") was a pool of quite different character; (Page 1013.) 94. Q. You did not understand then, if I understand you, each manufacturer, as its Handbook stated, really did "conduct his that the Licensed Association so-called, of which your company became a business entirely independent of the other, and . . . . in open com- member and in which it had a voice in the management, had the power to determine to whom licenses should be granted under the Selden patent and petition." Handbook, 1903, p. 5. Cf., however, what is said of the to whom they should not be granted? organization and history of this patent association on pages 227-235. A. I knew there was a provision in the agreement whereby it required, 150. Benjamin Briscoe, "The Inside Story of General Motors," I believe, a three-quarter vote to admit new members into the association. Detroit Saturday Night, January 22, 1921. I know members have been admitted since that time and I see no reason why they should not continue to he admitted provided they are good and 16o. Seltzer, op. cit.; the original investment amounts for the Hud- reliable manufacturers. son and Reo Companies check with what Mr. Coffin and Mr. Olds 95. Q. Did you and your board understand at the time this license and have told me. That for the Ford Company is well known and is articles were under consideration that the exercise of the monopoly under authentic; it is given also by Ford and Crowther, op. cit., p. 51. The the patent was given up by the Electric Vehicle Company to the Licensed various net worth figures cited in this paragraph were compiled by Association and that it (said association) had the power to say who should Seltzer from company reports and corporation records. and should not make, use, or sell gasoline automobiles? A. The Articles of Agreement provide just how new members are ad- tot. Briscoe, op. cit. mitted, and I never regarded it in the light of a monopoly. (Page 1021.) 132. Q. Did the Board of Directors of the Cadillac Auto- 162. See Seltzer, op. cit., chapter on the General Motors Corpora- mobile Company consider, at the time of executing these articles or before, tion, pp. 161 ff. whether or not they might operate as a restriction of the business of the 163. Briscoe. Cadillac company? 304 THE AUTOMOBILE INDUSTRY NOTES 305

A. \Ve signed the license agreement believing it to be to the best interests defined as the gross assets minus all liabilities to others than stock- of our company, also believing the Selden patent good and binding. holders and bondholders, but excludes good will and includes reserves Answer objected to as not responsive and question repeated. for contingencies; it is thus roughly the equivalent of the economist's A. \Ve have done, we believe, the largest business during the past three term "invested capital." For a more complete explanation of these years of any automobile manufacturer in the United States. This fact would prove that the Selden patent had not restricted our business. and other details of the method of compilation, see Appendix B, pages 133. Q. I don't think you understand my question. In view of the state- 352-354• ments in your last answer, did it ever at any time occur to your Board of 175. Ford and Crowther, op. cit., p. 51; also Poor's Manual, 1925, Directors that by virtue of this provision in Article II three-quarters of the p. 1283. members of the Board of Managers might say that you were doing too 176. Ford and Crowther, much business and adopt a rule that no one member should make over five op. cit., p. 51. hundred vehicles a year and that they might adopt another rule fixing the 177. Ford and Crowther. op. cit., pp. 51-52. prices for them at which they should be sold? 178. Ibid. (Page 1022.) A. Such a thing never occurred to our Board of Directors and inasmuch as I have personally attended I believe every meeting of the 179. Fiscal year ended July 31. Board of Managers of the Association that has been held, I can say that no 180. See Appendix B, p. 353. action has ever been taken or considered which would in any way place any limitation on what could be done by any individual member. 181. I am told by Mr. Metzger that Mr. Ford in the early days once drew for him a diagram illustrating this by an isosceles triangle. 170. See the testimony cited in .Note 169, answer to Question 94. in which selling price was measured along an imaginary perpendicular 171. 172 Federal 937. running from apex to base and the total volume of sales by the area between the apex and any horizontal lines which one might draw 172. Summaries are to be found in the decisions of Hough, 172 through points in this perpendicular, at right angles to it. Each reduc- Federal 924, and Noyes, 184 Federal 894, and a fuller discussion, upon tion in price was calculated to cause more than a proportional increase which the attorneys drew, in Dugald Clerk, The Gas Engine, New in sales. Mr. Metzger believes that the success of the York: John Wiley and Sons, r886. Cosmopolitan. Munsey's, and McClure's magazines in greatly expanding their circula- 173. A somewhat fuller, and popular, discussion of the original cross- tions upon reducing prices to ten cents, about this time, perhaps license agreement is found in John K. Barnes, "The Men Who Created stimulated Mr. Ford's thought in the matter. Cooperative Competition," World's liPork, May, 1921. 182. Cf. the saturation of the high-priced car market, and lesser expansion of the medium-priced as compared with the low-priced mar- CHAPTER IX ket, page 97, above. 174. The figures from which the following compilations and charts 183. The Ford truck, a one-ton vehicle made in the same plant as have been made are taken from three sets of sources: tables in Seltzer, the passenger car, has practically the same chassis as the passenger op. cit., corporation reports, and Poor's Manual and Moody's Manual car, except for a heavier frame, heavier springs, and different wheels of Industrials. Seltzer gives the individual figures through 1924 for and rear axle; its motor, transmission, and front axle assembly are 8 of the 15 concerns (counting General Motors as one company) identical with those of the passenger vehicle. which are discussed, but does not summarize them so as to arrive at 184. The Model T was announced in 1908, and only in 1925 were the profits of these producers taken together. The individual figures any but trifling changes made in its chassis. Even then, the altera- he discusses in relation to their bearing upon the question of what por- tions were not substantial. tions of their 1924 net worths came out of earnings, not particularly in relation to their significance for the theory of business profits. The 185. Mr. Ford in his book (Ford and Crowther, op. cit., pp. 19-20; Ford net worth figures for 1922-1926 I have estimated on a somewhat repeated on pp. 273-274) puts the explanation in somewhat different hazardous basis; this is explained in Appendix B. Net worth is here terms. He attributes his success to the facts that his institution has 306 THE AUTOMOBILE INDUSTRY NOTES 307

eliminated waste and greed, and is performing a service. "The prin- 188. This and the figures for the stockholders' net equity in the ciples of the service," he says, "are these: other companies above discussed are computed on the basis of certain "1. An absence of fear of the future and of veneration for the of the data employed in Chart 47. past . . . . "2. A disregard of competition . . . 189. Alfred Marshall, op. cit., 1st ed., p. 658. "3. The putting of service before profit . . . . 19o. I give both car and truck capital investment figures because "4. The realization that] Manufacturing is not buying low and Ford, General Motors, and Reo, and in some years Packard, have selling high . . ." made commercial vehicles, and the earnings on their truck divisions 186. Seltzer, op. cit., p. 263. are included in the figures. But by far the larger proportions of the capital of all these companies (excepting, in late years, Reo) has been 187. The figures for General Motors which rest on the assumption devoted during most years to passenger car manufacture and, it seems that rights have been exercised I take from an article in the Wall Street certain, constitute well over 90% of the total investment in that branch Journal for August 16, 1927, entitled "Large Profits in General of the automotive field. I have computed these percentages which Motors." The following table is an abridgement of the one there follow by adding together individual net worth figures found given in given: Seltzer's work, in corporation reports, and in Poor's and Moody's Manuals, and by relating them to the total capital figures published in Total N.A.C.C., 1919, 1925, and 1927. Cumulative Market Value Shares 191. Op. cit., p. 645. Year Owned Cash of Holdings and Investment Cumulative 192. I have in mind the distinction implied by Marshall, Taussig, Cash Return and others, and explicitly stated by Fisher, namely, that an increased demand in the schedule sense denotes a willingness on the part of 1927* $2,028,539 consumers to purchase greater quantities at the same series of prices, 192h 7,269 2,424,303 while an increased demand in the market sense denotes an increase 1925 785,237 of consumption caused only by a lowering of price. 1924 4,846 476,305 1923 424,937 193. Op. cit., pp. 276-277. 396,830 1922 194. "Compensation" is not employed here in any sense of exact 1921 295,064 reward, as will appear below. As suggested above, page 192o 19,384 899,500 355,639 39, no actu- 1919 1,500 39,500 572,750 arial computation of risk whatever was possible in this new industry. 19281 211,250 195. F. W. Taussig and W. S. Barker, "American Corporations and 19171 1,250 162,188 Their Executives," Quarterly Journal of Economics, November, 1925. 1917 169,063 1916 140,781 196. Probably over half a billion dollars; the figure was $497,000,000 1915 43,313 in 1914 and $785,000,000 in 1919. 21,656 1914 197. There is available, of course, no average figure of profits for 8,000 1913 all industries over any very considerable period, but such studies as 1914 8,188 have been made indicate that the level in the automobile industry even 191111. 11,688 1910 250 for the years since 1917 is higher than that in most other trades. Profit 19091 1 0co figures for ro8 different industries in the one year 1907 are given in an article by the present writer, "Industrial Profits in 1917," Quarterly • Six months to June 3o. § Twelve months to July. Journal of Economics, February, 1925. Cf. also the figures given in Twelve months to December 31. I Ten months to July 31. 1- the more recent study of Taussig and Barker, "American Corporations $ Five months to December 31. fit Twelve months to September 3o. 308 THE AUTOMOBILE INDUSTRY NOTES 309 and Their Executives," Quarterly Journal of Economics, November, to% at most since that time. See the capital investment figures in 1925. Appendix A, page 316. 198. See Chapter II. 207. Mr. E. E. Hunt, of the Department of Commerce, who has 199. J. W. Roe, English and American Tool Builders, p. 5. given some attention to this matter of "excess capacity" in industry in 200. By this term is meant the concept most fully developed by general, has shown me estimates of overcapacity in other branches of Alfred Marshall, op. cit., namely, the amount per unit which it is manufacture which are seemingly just as high as my guesses concern- necessary to offer to producers (or the "marginal" or "last" producer ing the automobile industry—if my assumption that r 2 times the best required) in order to persuade them to participate in the production month's output equals the theoretical yearly maximum is at all correct. of a given commodity. 201. Only in comparatively recent years have shares of most of these corporations come to be owned by the general public. Packard was listed on the New York Stock Exchange in 1923, Hudson in 1923, and Dodge Brothers in 1925, while Reo and Ford have never been there listed. The stocks of certain automotive firms not listed on the New York Exchange have, however, for some years been traded on the Detroit and Chicago stock exchanges, and on the New York Curb; Reo is listed on the Curb, and so is the Canadian Ford company. The American Ford company, however, has never been listed.

CHAPTER X 202. The method is to add to the registration of a given year the production of the following year; from this figure, subtract the "fol- lowing" year's exports; from the result, subtract the "following" year's registration; divide this figure by 2, which gives the number of vehicles scrapped during the last half of the given year. Then to this, add the number of vehicles scrapped during the first half of the "following" year, similarly computed; the resulting total is the vehicles scrapped during the given year itself. A table giving the results thus computed for each year over the period 1913-1926 is given in Appendix A. page 316. 203. See their article entitled "The Automobile Industry and Pros- perity," World's Work, December, I92'6. 204. N.A.C.C. Foreign Trade Bulletin No. FT 256, March to, 1927. 205. The figures which follow in this and the next paragraph are taken from the N.A.C.C. Bulletin just cited. 206. That is, with equipment as of October, 5925. The industry's investment (as of 1927) has increased by only about 5% or possibly APPENDICES APPENDIX A

GENERAL STATISTICS OF AUTOMOTIVE MANUFACTURE, MARKET DISTRIBU- TION, AND FINANCE

The figures which follow are compiled from tables in the various editions of Facts and Figures of the Automobile Industry, the annual publication of the National Automobile Chamber of Com- merce, 366 Madison Avenue, New York City, or from information obtained from the staff of that organization, unless otherwise stated. 314 THE AUTOMOBILE INDUSTRY APPENDIX A 3 1 5

I. Production and Value of Product TRUCK PRODUCTION

PASSENGER CAR PRODUCTION Year Number of Wholesale Trucks Value Number of Wholesale Year Passenger Cars Value 1903-1910 10,374 20,485,500 1911 10,855 22,292,321 1912 22,000 1899 2,500 $ 4,899,443 43,000,000 1913 23,500 1900 5,000 44,000,000 1901 7,000 1914* 25,375 45,098,464 1915 000 1902 9,000 74, 125,800,000 1903 11,235 12,650,000 1916 92,130 166,650,273 1917 1904* 22,419 23,682,492 128,157 220,982,668 1918 227,250 8,992 1905 24.55° 434,16 1919 1906 33,500 2 75,943 423,326,621 1920 321,789 1907 43,300 423,249,410 1908 63,500 /920 146,082 164,858,550 1909* 127,731 159,918,506 1922f 249,228 220,119,667 1910 81,000 213,000,000 1923f 385,755 305,999,606 363,530 307,211,344 1911 199,319 240,770,000 1924f 1912 356,000 335,000,000 1925t 473,154 433,744,079 1913 461,500 399,902,000 1926f 491,353 433,371,169 1914* 543,679 413,859,379 1915 895,930 575,978,000 * From United States Census Reports. 1916 1,525,578 921,378,000 t Canadian production included. 1917 1,740,792 1,053,505,781 1918 943,436 801,937,925 CANADIAN PRODUCTION 1919 1,657,652 1,461,785,925 1920 1,905,560 1,809,170,963 1921t 0 000 1,514,000 1, 93,918, Year Cars* Trucks Year Cars* Trucks 1922f 2,406,396 1,567,003,041 1 923f 3,694,237 2,276,399,270 1919 79,936 7,899 1923 127,976 19,226 1924f 3,243,285 2,011,038,288 1920 83,636 10,508 1924 98,365 18,043 1925f 3,839,302 2,523,642,558 1921 61,098 5,148 1925 836,409 25,812 1926f 3,936,933 2,730,385,507 1922 92,838 8,169 1926 168,302 36,814

• From United States Census R sports . * Including special chassis. f Figures include production of United States owned plants located in Canada, making motor vehicles of United States design. The 1899 figure is for the fiscal year ended June 3o, r 000. PASSENGER CAR PRODUCTION, UNITED STATES ONLY, 1 92 1-1926

1921 1,452,902 1924 3,144,999 1922 2,302,903 1925 3,696,490 1923 3,589,936 1926 3,765,059 316 THE AUTOMOBILE INDUSTRY APPENDIX A 31 7

MOTOR VEHICLES SCRAPPED ANNUALLY IN UNITED STATES, EMPLOYMENT AND WAGES, 1926 I913-I926* Number of persons employed in motor vehicle factories 375,281 Total wages paid such employees Number of Number of $657,724,859 Number of persons employed in parts and accessory factories Vehicles Vehicles 320,000 Number of persons employed in tire factories 100,000 Year Scrapped Year Scrapped Number of persons employed in repair shops 450,000 1913 117,424 1920 357,355 Number of motor vehicle dealers and salesmen 225,000 1914 131,087 1921 507,150 Number of supplies and accessories dealers and salesmen 135,000 1915 321,415 1922 815,200 Number of garage employees 125,000 1916 397,206 1923 877,930 1917 1924 1,145,820 141,843 Total number of persons employed directly in automobile and 1918 196,195 1925 1,668,016 trade production, distribution, operation and maintenance 3,365,281 1919 411,144 1926 1,900,000f

*Computation by 0. P. Pearson according to method described in Note 202, page 3o8. Preliminary estimate.

2. Invested Capital, Employment, and Wages 3. Registration of Motor Vehicles

INVESTED CAPITAL BY YEARS, FOR ENTIRE UNITED STATES*

Passenger Year Number Year Number Year Cars Trucks Total 5895 4 1911 639,5°9 1899* 8 5,760,000f 1896 16 1912 944,000 1897 1913 1904* 23,084,0001 90 1,258,062 1909* 173,837,000f 1898 Boo 1914 1,711 ,339 1899 1915 1914 407,730,0001 3,200 2,445,666 1919 $ 784,660,761 $230,782,577 1,015,443,338 1900 8,000 1916 3,512,996 1901 1917 1920 897,953,600 306,425,000 1,204,378,6 $+ 14,800 4,983,340 1921 1,134,166,000 289,334,000 I,423,500,000$ 1902 23,000 1918 6,146,617 1922 1,154,103,335 302,546,620 1,456,649,954$ 1903 32,920 1919 7,565,446 1923 1,281,364,300 290,358,100 1,571,722,40(4 1904 55,000 1920 9,23 1,941 1905 78,000 1921 1924 1,373,372,4z6 317,677,686 1,691,050,114 10,463,295 1925 1,503,290,062 384,738,748 1,888,028,814 1906 107,000 1922 12,23 8,375 1926 1,646,589,759 442,908,566 209,498,325$ 1907 142,000 1923 15,092,177 1908 1 97,500 1924 1 7,591,981 1909 312,000 1925 From 1919 edition of Facts and Figures. 1 9,954,347 1910 1926 Includes body and parts plants. 468,500 22,101,393 Tangible assets, United States factories. Does not include parts, accessory, body, and the manufacturers. • As of the end of each year.

318 THE AUTOMOBILE INDUSTRY APPENDIX A 31 9 BY STATES, AS OF DECEMBER 31, 1926 4. World Trade, World Production, and World Regis- tration State Number State Number UNITED STATES EXPORTS OF PASSENGER CARS Alabama 225,930 New Hampshire 89.001 Arizona 73,682 New Jersey 651 ,415 Arkansas New Mexico Calendar Year Number Value California 1,619,441759 New York Colorado 248,613 North Carolina. '38815554 049 39(4471 1919 6 7,145 73,700,52 7 Connecticut 263,235 North Dakota 157,822 1920 142,508 165,255,921 Delaware 44,834 Ohio 1,480,246 1921 30,950 3 2,533,7 25 Florida 401,562 Oklahoma 499,938 1922 66,790 51,049,816 Georgia 2 77,468 Oregon 233,568 1923 127,035 90,692,272 Idaho 94,760 Pennsylvania 1,41181505,1:17 1848964 1924 151,379 112,531,154 Illinois 1,370,503 Rhode Island 1925 252,124 190,869,665 772,326 South Carolina 1926 245,443 182,094,181 Iowa 698,998 South Dakota 168,230 Kansas 491,2 76 Tennessee 279,639 Kentucky 281,557 Texas Louisiana 239,500 Maine 151,486 Vermont 74,063 UNITED STATES EXPORTS OF MOTOR TRUCKS AND Maryland 252,852 AUTOMOBILE PARTS Massachusetts 690,190 Washington 1'0:362: Michigan 1,118,785 West Virginia 227,836 Minnesota 630,285 Wisconsin 662,282 Number Value of Value of Mississippi 205,200 Wyoming Calendar Year of Trucks Trucks Parts Missouri 654,554 District of Columbia 111,497 Montana 103,958 1919 15,585 $35,42 5,437 $ 42,562,186 Nebraska 366,773 Totals 22,001,393 192o 29,136 46,775,781 86,198,013 Nevada - 24,014 1921 7,480 10,335,893 39,058,729 1922 11,443 8,270,908 38,298,032 1923 24,861 15,318,058 58,974,907 1924 27,351 19,199,329 73,759,406 1925 60,116 39,095,547 86,943,913 1926 68,174 48.577,618 105,128,015 32o THE AUTOMOBILE INDUSTRY APPENDIX A 32I

EXPORTS AND IMPORTS OF MOTOR VEHICLES (PASSENGER CARS WORLD REGISTRATION OF MOTOR VEHICLES, AS OF JANUARY 1, AND TRUCKS) 1 9 2 6*

EXPORTS IMPORTS Number of Number of Persons Country Motor Vehicles per Motor Vehicle Calendar Year Number* Value Number Value United States 20,051,276 6 1919 83,000 $109,0000100 117 $ 123,025 United Kingdom 815,957 SS 192o 173,000 212,000,000 926 1,026,518 France 735,000 53 1921 38,000 43,000,000 522 876,163 Canada 715,962 13 000 1922 78,00o 483 802,285 Germany 323, 193 1923 152,000 1056:9 000::000 853 884,125 Australia 291,212 20 Argentina 178,050 1924. . 178,000 132,000,000 604 841 ,524 55 1925 312,240 229,965,212 678 1,079,560 Italy 1 ,4,700 ,346 1926 313,617 230,671,799 813 1,352,984 New Zealand 99,443 14 Belgium 92,713 84 Spain 76,00o 286 Completed vehicles; excludes foreign assemblies of American units. Total vehicles exported, counting these assemblies, were: 1925, 451,590: 1926, 412,965. Union of South Africa 69,350 105 India 69,127 2,573 Denmark 66,567 51 Brazil 63,650 530 WORLD PRODUCTION OF MOTOR VEHICLES (Passenger Cars and Trucks), 1926* • Figures from Automotive Division, United States Department of Commerce.

United States 4,318,461f Canada 205,116 SQUARE MILES OF AREA TO MILES OF ROAD, VARIOUS COUNTRIES France 200,000 England 198,699 United States 1.0 96 Italy 64,760 8 . 6 Germany Austria 54,500 Eight other European coun- Venezuela uela 156 Czec ho-Slovakia . 7,500 tries 8. 2 Brazil 174 Belgium 6,000 Norway 14.0 Ecuador 340 Austria . 5,290 Australia 28. o Colombia 554 Spa in 1,o5o Uruguay 58.o Argentina 1,455 Total World Production. 5,061,584 Proportion of U. S. output to world production. 85%

• Figures prepared by Automotive Division, United States Department of Commerce; reprinted in Facts and Figures, 1927. I Includes American cars assembled abroad. APPENDIX A 322 THE AUTOMOBILE INDUSTRY 323 5. Installment Sales: Financial Figures and Ratios. 6. Financial and Other Statistics: Ford Motor Com- pany and General Motors Corporation AVERAGE OR COMPOSITE EXPERIENCE OF ABOUT 150 REPRESENTA- TIVE FINANCE COMPANIES, BASED UPON INDIVIDUAL AVER- FORD MOTOR COMPANY AGES FOR ONE YEAR, AS OF NOVEMBER I. BALANCE SHEETS AS OF DECEMBER 31, 1925 AND 1926 Abridged from a compilation by the National Association of Finance Companies, Chicago, Dec. 3t, 1926 Dec. 31, 1925 ASSETS NEW AND USED CARS 1925 1926 Cash, Accounts and Notes Receivable, Percentage of cars sold on the installment plan: Investments, Patents, Furniture and All cars 75,5% Fixtures• $413,709,361 $377,105,078 New cars 64% Real Estate 143,293,982 132,107,208 Automobile retail paper: Machinery and Equipment 137,615,082 124,445,908 Percentage calling for 13 or more monthly pay- Deferred Charges 1,514,667 1,624,236 ments /8.32% 13.24% Merchandise 88,074,988 107,631,138 Percentage with down payment of 35% or less on used cars and 25% or less on new cars 19.36% 9% Total Assets $784,208,080 $742,913,568 Average amount of purchase money note (total of installments per car): LIABILITIES New cars $550 $595 Capital Stock $ 17,264,500 $ 17,264,500 Used cars $28o $277 Accounts Payable 50,294,734 76,633,613 Average loss per repossessed car: Reserve for Taxes 18,866,058 26,503,562 12 equal monthly payments or fewer $ 5o $ 65 Mortgage Payable 145,000 145,000 13 to 18 equal monthly payments $ 78 $ 94 Surplus 697,637,788 622,366,893 More than 18 equal monthly payments (or "balloon" note) $220 $158 Total Liabilities $784,208,080 $742,913,568 NEW CARS Percentage of repossessions: • These assets are all lumped together in the Ford Company's balance sheet. The data have been drawn from Moody's Manual of Industrials, 1926. Down payment 331/2% of cash price or 30% of time selling price 1.72% 2.09% Down payment 25% of time selling price 3.81% 4.02% Down payment less than 25% of time selling price 10.96% 11.52% USED CARS Percentage of repossession: Down payment go% of cash price or 37% of time selling price 3.01% 4.2 7% Down payment less than 37% of time selling price 6.r6% 8.57% Used car paper percentage of total auto retail paper handled 31% 33% Percentage of companies requiring dealers' endorse- ment of all used car paper 5o% 46% Percentage of companies requiring dealers' endorse- ment of part used car paper 44% 40% APPENDIX A 32 4 THE AUTOMOBILE INDUSTRY 32 5 PRODUCTION OF FORD CARS AND TRUCKS, GENERAL MOTORS CORPORATION CALENDAR YEARS 1903-1926 CONDENSED CONSOLIDATED BALANCE SHEETS, 192 5 AND 1926 (United States only) (Abridged from 1926 Annual Report)

Number Number Number Number December 31, December 31, Year of Cars of Trucks Year of Cars of Trucks 1926 1925 ASSETS 1903 708 1915 367,416 Current and Working Assets 1904 1,000 1916 597,956 .... Cash in banks and on hand $117,825,372.05 $108,290,770.02 1905 1,695 1917 808,590 7,341 United States Government secur- 1906 1,599 1918 350,673 54,564 ities 12,840,580.65 25,141,317.68 1907 8,423 1919 696,482 104,508 Other marketable securities (in- 1908 6,158 1920 893,621 132,911 cluding temporary loans in 1909 12,292 1921 871,886 66,130 1925) 4,732,433.44 11,710,000.00 1910 19,293 1922 1,111,715 139,356 Sight drafts with bills of lading 1911 40,402 1923 1,699,984 214,740 attached, and c.o.d. items 12,073,433.68 8,195,347.90 1912 78,611 1924 1,585,427 204,851 Notes receivable 1,895,576.92 2,764,005.41 1913 182,799 1925 1,525,939 249,306 Accounts receivable and trade 1914 258,356 1926 1,271,882 171,020 acceptances, less reserve for doubtful accounts 27,707,286.38 20,817,403.47 Inventories at cost or market.. 156,203,663.15 112,091,659.13 Prepaid expenses 3,059,866.96 1,858,584.43

CANADIAN PRODUCTION OF FORD PASSENGER CARS Total Current and Working Assets $336,338,213.23 $290,869,088.04

Number Number Fixed Assets Year of Cars Year of Cars Investment in affiliated and mis- cellaneous companies $ 79,715,822.88 $ 86,183,747.07 1922 46,068 1925 . 61,882 General Motors Corporation 65,010 1926 81,361 1923 stocks held in treasury 19,4911738.97 11,963,578.38 1924 57,865 Real estate, plants, and equip- ment 434,373,903.49 287,268,286.41 Deferred expenses 7,404,422.37 5,119,837-95 Good will, patents, etc. 43,570,004.95 22,382,127.00

Total Fixed Assets $584,555,892.66 $412,917,576.81

TOTAL ASSETS $920,894,105.89 $703,786,664.85

326 THE AUTOMOBILE INDUSTRY APPENDIX A 327

December 31, December 31, GENERAL MOTORS CORPORATION LIABILITIES, RESERVES, AND CAPTTAL 1926 1925 CONDENSED CONSOLIDATED INCOME ACCOUNTS, 1925 AND 5926 Current Liabilities (Abridged from 1926 Annual Report) Accounts payable $ 48,221,294.10 $ 44,829,843.16 Taxes, pay rolls, and sundries Year Ended Year Ended December 3 December 31, accrued, not due 29,723,532.81 23,657,818.70 1926 1925 United States and foreign income taxes 30,324,496.79 13,912,000.00 Profit from operations and invest- Accrued dividends on preferred ments $243,141,474.63 $1 49, 296499.43 and debenture stock 1,274,714.63 1,214,872.84 Provision for depreciation 20,259,973.51 1 7,236,506.84 Extra dividend on common stock, Net profit from operations and invest- payable January 34,788,557.67 25,427,672.50 ments $222,881,501.12 $132,059,992.59

Total Current Liabilities. . $144,3327596.00 $109,042,207.20 Less: Provision for miscellaneous items $ 20,347,819.02 $ 11,077,460.70

Total Reserves (Depreciation and other $202,533,682.10 $120,982,531.89 items) $139,883,506.21 $105,766,217.16 Less: Provision for United States and foreign income taxes 25,834,939.06 13,912,000.00 Capital Stock Seven per cent preferred stock $105,333,200.00 $104,619,200.00 Net income $176,698,743.04 $107,070,531.89 Six per cent preferred stock (out- standing and authorized) 1,795,900.00 2,175,700.00 General Motors Corporation propor- Six per cent debenture stock (out- tion of net income $176,085,144.55 $106,484,756.18 standing and authorized) 2,786,900.06 3,121,100.00 Seven per cent preferred stock Common stock no par value dividends $ 7,352,290.74 $ 7,315,222.21 (Issued, 8,700,000 shares; in 1925, 5,161,599 shares) 435,000,000.00 258,079,950.00 Six per cent preferred stock divi- dends 116,928.00 1 35,540.50 Total Capital Stock $544,916000.00 $367,995,950.00 Six per cent debenture stock divi- Interest of minority stockholders dends 176,068.50 189,228.50 in subsidiary companies 2,420,685.21 1,961,817.65 Surplus $ 89,341,318.47 $119,020,472-84 $ 7,645,287.24 $ 7,639,991.21

Total Capital Stock and Sur- Earned on common stock $168,439,857.31 $ 98,844,764.97 plus $636,678,003.68 $488,978,240.49 Plus: Equity in the undivided profits TOTAL LIABILITIES, RE- of General Motors Acceptance SERVES, AND CAPITAL. . $920,894,105.89 $703,786,664.85 Corporation, Yellow Truck and Coach Manufacturing Company, Ethyl Gasoline Corporation, and Fisher Body Corporation. Total earnings on common stock.. . $178,585,895.00 $i08,376,286.44 0

APPENDIX B g0. SOURCES AND SUPPORTING DATA

<4 0,- r . List of Acknowledgments to Individuals THE following is a list of the principal persons to whom the 6"'N " writer is indebted for aid in the collection of data. U, 0, G. C. ARVEDSON, assistant manager, Patent Department,

2 6 6 4 6 1 0 U) 6 National Automobile Chamber of Commerce, New York . 2 2 7 5 8 . 617 3 61 3 3 2 20 80 9 . .. . City. 8, 5, 3, 2, c4 8, 15,

0. 15, 74, 3 2 3 64,

O Cy 7 21 4 C..) C4 LEONARD P. AYRES, vice-president, Cleveland Trust Com- 44 pany, Cleveland. ...t z C. O .7.. 0, JoHN F. BAUER, secretary, Foreign Trade Committee, Na- 1-4 tional Automobile Chamber of Commerce, New York City. a Op .1 R. B. BELKNAP, vice-president, McFarlan Motor Corpora- J e 4,1 0 .0, tion, Connersville, Indiana. W. H. BRANDEL, 25 Days Park, Buffalo. 0 •0 N 0 0, O ROBERT A. BRANNIGAN, manager, Patent Department, Na-. tional Automobile Chamber of Commerce, New York City. E=1 BENJAMIN BRISCOE, New York City; formerly president, L.) z . United States Motor Company. A. J. BROSSEAU, president, Mack Trucks, Inc., New York .-4■ .i. City. M i .3- 0 P 7; ul cl, E., C C.) = g v ,4 A. B. BRUSH, Brush Engineering Association, Detroit. (...) ... 7..7. ,.,. , .75.4 g u .12 11 E ,9 < 41 d 0 a' .L ., 0 C.) 0 ',-', V , ., :Li , 4 W. A. BRUSH, Brush Engineering Association, Detroit. ..:' d •::: !.- •- ■ ,;; v g w C.; CDZ -•-42 • a 41 ..... -62 iii 5 .2'4' 712,4 -.S.1 1,.00

JAMES S. MARVIN, assistant general manager, National Auto- GEORGE W. SAWIN, manager, The B. F. Goodrich Rubber mobile Chamber of Commerce, New York City Company, Akron. WILLIAM E. METZGER, director, National Chamber of Com- JOSEPH A. SCHULTE, general manager, Detroit Branch, Cad- merce, New York City; vice-president, Federal Motor illac Motor Car Company, Detroit. Truck Company, Detroit. Formerly sales manager, Cadil- JOHN W. SCOVILLE, statistician, Chrysler Corporation, De- lac Motor Car Company, and vice-president, Everitt- troit. Metzger-Flanders Company. S. A. MILES, manager, Passenger Car Show Committee, Na- GEORGE B. SELDEN, JR., 13 Grove Place, Rochester, New tional Automobile Chamber of Commerce, New York City. York. R. H. MuLcir, general manager, Flint Motor Company, LAWRENCE H. SELTZER, associate professor of economics, Flint, Michigan. College of the City of Detroit, Detroit. R. E. OLDS, chairman of the board, Reo Motor Car Com- H. 0. SMITH, chief of Automotive Division, Department of pany, Lansing; formerly vice-president, Olds Motor Works. Commerce, Washington. CHARLES COOLIDGE PARLIN, manager, Division of Commer- FRANZ SNIDER, financial editor, New York Sun. cial Research, Curtis Publishing Company, . S. A. STEPHENS, president, S. A. Stephens, Inc., Buffalo. W. J. PARRISH, general sales manager, Wills-Sainte Claire, E. H. STRUNK, Packard Motor Car Company, Detroit. Inc., Marysville, Michigan. I. H. TAYLOR, assistant chief of Automotive Division, De- OSCAR P. PEARSON, statistician, National Automobile Cham- partment of Commerce, Washington. ber of Commerce, New York City. E. LEROY PELLETIER, advertising manager, Rickenbacker C. A. VANE, general manager, National Automobile Dealers' Association, Chicago. Motor Company, Detroit; formerly advertising manager, Everitt-Metzger-Flanders Company. F. S. VORN, assistant advertising manager, The Studebaker W. L. POWLISON, librarian, National Automobile Chamber Corporation of America, South Bend, Indiana. of Commerce, New York City. J. B. WAGSTAFF, sales promotion division, Willys-Overland, A. B. QUALE, secretary, Willys-Overland Company, Toledo. Inc., Toledo. ALFRED REEVES, general manager, National Automobile HENRY G. WEAVER, director of sales research, General Mo- Chamber of Commerce, New York City; formerly sales tors Corporation, Detroit. manager, United States Motor Company. JorlerNNN.. WILLYS, president, Willys-Overland Company, To- FRANK W. RocitE, president, Motor Trades Publishing Com- ledo. pany (Automobile Topics), New York City. ALEXANDER WINTON, president, Winton Engine Company, M. H. ROMIG, advertising manager, Velie Motors Corpora- Cleveland; formerly president, Winton Motor Car Com- tion, Moline, Illinois. pany.

APPENDIX B 335 334 THE AUTOMOBILE INDUSTRY CHART 4 2. Data of Charts and Tables SOURCE: N.A.C.C., 1925.

CHART I No. of No. of Year Passenger Year Passenger SOURCE: Facts and Figures of the Automobile Industry, published by the Cars National Automobile Chamber of Commerce, New York City, Cars 1924 and 2927 editions, hereinafter referred to as NA.C.C.; also 1903 11,235 1910 data compiled by American Te ephone and Telegraph Company. 181,000 1904 22,419 1921 199,319 I905 24,550 1912 356,000 Motor Vehicle Number of 1906 33,500 1913 461,500 Year Registration Telephones 1907 43,300 1914 543,6 79 2908 63,500 1915 818,618 1902 28,755 2,371,044 1909 127,731 1916 1,525,578 1907 142,061 6,118,578 1912 944,000 8,729,592 1917 6,146,617 11,716,52o 1923 12,238,375 14,346,701 CHART 5 1926 22,001,403 17,746,168 SOURCE: These data are compiled from the same source as those of Chart 4.

1901-1904 49,000 CHART 2 1905-1908 166,000

SOURCE: N.A.C.C., 1927; United States Census of Manufactures, 192o and 1909-1912 864,000 1921. 1913-1916 3,351,000

Motor Year Wagons Carriages Vehicles CHART 6 SOURCE: The data for this chart were obtained by classifying and adding 1904 643,755 937,409 22,830 together individual company production figures, which in nearly 1909 587,685 828,422 130,986 all cases were obtained from confidential sources. The method of 1914 557,472 550,401 569,054 compilation was as follows. The Handbook of Gasoline Auto- 1919 414,909 244,866 1,933,594 mobiles, company catalogues, and the files of trade journals for each year from 2904 to 1917 were consulted to ascertain the num- ber of models made by each producer and the price of each model. CHART 3 The price of the standard touring car was taken in every case where a touring car was made, except for the years 1920-1926, SOURCE: Department of Agriculture, Bulletin No. 1279; also, N.A.C.C., when the production of each maker was divided into closed and 1927. open cars; the closed car taken was either the coach or the 5- passenger standard sedan. The proportions assigned to the closed Year Miles Surfaced Year Miles Surfaced models in these years, except in individual cases where the exact ratio was known to vary greatly from these figures, were as follows: 2904 1 53,530.40 1914 257,291.54 1909 190,476.32 1921 387,760.00 2920, 1/6 1922, 1/3 2924, 2/5 1026, 2/3 2926 521,915.00 1921, 2/5 1923, 1/3 1925, 2/2 336 THE AUTOMOBILE INDUSTRY APPENDIX B 337

1903 1904 1905 1906 1907 1908 1909 1910 1911 1912 1913 1914 1915 1916 Price Class % % % % % % % Price Class % % % % % % % $675 or under 12.0 1.9 5.o 6.9 4. 2 7-5 4.7 $675 or under 7.o 15.9 36.o 46.6 49.3 43.9 51.1 6764875 22.1 16.5 5.1 2.7 14.5 18.8 4.9 6764875 5.9 30.2 3.2 0.5 5.0 15.5 19.8 876-1375 42 .4 47.0 38.5 26.2 19.8 19.5 33.2 876-1375 39.4 12.8 23.7 19.9 27.0 15.3 20.1 1376-1775 6.1 4.2 14.2 8.3 7.8 ,o.6 23.7 1376-1775 28.3 23.8 12.3 13.7 8.1 17.8 5.2 1776-2275 1.7 4.5 6.9 5.8 12.3 10.4 1.1 1776-2275 3.7 5.1 16.0 10.2 5.7 3.4 2.2 2276-2775 12.0 7.4 5.8 18.4 12.5 16.6 6.1 2276-2775 5.1 o.8 0.9 3.9 1.5 2.3 0.5 11.0 2776-3775 7.6 8.1 21.3 14.8 13.0 3.5 2776-3775 5.3 7.2 3.3 2.6 2.3 1.1 0.9 13.4 10.4 8.7 3776-4775 2.6 3.1 2.1 7.6 3776-4775 3.3 1.9 1.9 1.6 0.5 0.2 0.1 4776 and over 1.3 1.7 1.4 4.2 4.8 5.2 4.4 4776 and over 2.0 2.3 2.7 1.0 o.6 0.5 0.1

When more than one type of chassis was made by the same com- however, my totals roughly coincided with (came to within 9o% pany and the proportion of production in each model could not to 100% of) the published production figures for the industry. be ascertained, the output of the maker was counted as being The absolute detailed figures are not here given; but the pro- evenly divided between the two or more types of chassis sold portions of cars in each price class, as depicted in Chart 6, are as during the year in question. Though this division was in some given in the above tables. cases quite arbitrary, in other cases there existed reason to sus- pect that production actually was approximately so divided. It is, however, quite likely that errors thus made in one direction CHART 7 were largely compensated for by errors made in the other direc- SOURCE: The data of Curve A are those of Chart 4, expressed as in- tion. For example, some company whose production was arbi- dexes of the arithmetic mean average of the years 1909-1913. trarily split between two models, a $1,200 car and a $1,500 car, The data of Curve B are taken from Edmund E. Day, "An Index may have sold more $1,200 cars than $1,500 ones; but some other of the Physical Volume of Production," reprinted from Review company, making two products about similarly priced and whose of Economic Statistics, Harvard University Committee on Eco- production was likewise evenly divided in this count may well nomic Research, 1921, p. 55. The data of Curve C are from have sold more $1,500 cars than $5,200 ones. In the cases of Mitchell et al. (National Bureau of Economic Research), Income nearly all of the larger companies, however, either the actual or in the United States: Its Amount and Distribution, 1909-1919, p. the approximate proportions were ascertained within fairly close 76, but are here converted into percentages of the 1900-1913 limits. arithmetic average. The three sets of data follow. There were, furthermore, for some years substantial differences between the totals of cars in all classes and the total production CURVE A. PASSENGER CAR PRODUCTION figures estimated by the Census Bureau and by the National Automobile Chamber of Commerce. In part, these are explicable Year in that the "production" figures I have utilized are, as stated Index Number Year Index Number in the text of Chapter III, really factory sales figures. While over a long period the two sets of figures coincide, for short periods 1903 4. 1 1910 68.3 1904 8.3 1911 they may not; that is to say, they neglect annual "carryover" 75.0 loos of finished car inventories. But these discrepancies are great in 9.4 1912 130.3 1906 12.8 only two or three of the years under discussion; as stated in Note 1913 178.1 1907 16.2 75, I do not believe that they affect the percentage relationships 1914 205.2 1908 1915 involved; several friends in the industry, to whom I have shown 24.1 309.0 1909 48.3 1016 the data, share this opinion. For most of the years in question, 575.8 338 THE AUTOMOBILE INDUSTRY APPENDIX B 339 CURVE B. VOLUME OF MANUFACTURES CHART 9 SOURCE: Same as Chart 6. The method employed is analogous to that Year Index Number Year Index Number used in computing the data for that chart.

1903 73-3 1910 96.9 Year PERCENTAGE FOR EACH CYLINDER CLASS 1904 71.9 1911 92.4 2 6 8 12 1905 84.3 1912 105.9 3 4 '906 90.5 1913 109.2 1903 66.4 16.7 2.4 14.5 1907 91.3 1914 100.1 1904 61.9 17.0 1.5 19.6 1908 77.5 1915 109.3 1905 30.6 20.2 49.2 1909 05 4 1916 127.7 1906 17.2 26.0 0.4 53.4 3.o 1907 4.3 14.6 0.05 68.o 14.0 1908 5.6 11.7 0.7 72.0 10.0 CURVE C. NATIONAL INCOME 1909 7.8 4.9 0.3 74.0 13.0 1910 5.4 3.9 84.0 6.7 1911 4 5 3.7 86.o 5.8 Year Index Number Year Index Number 1912 o.6 91.5 7.9 1913 87.6 12.4 1909 94 1913 106 1914 88.o 11.9 1910 100 1914 102 1915 75.2 22.5 2. 3 1911 98 1915 106 1916 71.6 24.1 35 o.8 1912 103 1916 125

CHART I 0 SOURCE: Same as Chart 9. e Year PERCENTAGE FOR EACH CYLINDER CLASS CHART 8 1 2 3 4 6 8 12 Data through courtesy of Colonel Leonard P. Ayres. The casings SOURCE: 71.3 10.6 2.6 15.5 ...... are Firestone non-skid fabrics. 1903 1904 69.5 9.8 1.6 19.1 31.5 21.9 46.6 .... Date Paid 1905 1906.. 18.1 24.9 0.4 53.6 3.0 5.5. 8.9 o.8 76.3 8.5 1909 (November) $32.25 1907 1908 6.5 13.6 0.8 67.6 11.5 ... I910 (December) 29.55 1909 8.6 5.5 0.3 71.1 14.5 ... x 9i r ( January) 26.55 1910 6.1 4.4 ... 31 -9 7.6 ... 1912 (April) 25.0o 1911 6.2 5.1 80.7 8.o 1912 1.0 86.9 12.1 1913 (February) 22.20 1913 77.0 23.0 ... 22.95 1914 (August) 1914 76.9 23.1 ... 1915 (February) 13.35 1915 .... 57.1 38.4 4.5 ... 41.5 1.5 1916 (January) 14.70 1916 50.9 6.1 THE AUTOMOBILE INDUSTRY 340 APPENDIX B 341

CHART II CURVE R. REPLACEMENTS: HIGH-PRICED CARS SOURCE: Same as Chart 6.

CURVE A. Low-PRICED CARS Year No. of Cars 1912 18,5oo 1913 18,600 Year No. of Cars Year No. of Cars 1914 18,600 1915 18,600 1903 7,253 1910 89,113 1926 18,6o0 1904 9,440 1911 95,536 1905 11,215 1912 539,615 5906 11,951 1913 262,867 1907 13,285 1914 437,661 CHART I2 1908 19,072 1915 657,695 1909 56,284 1916 2,299,206 SOURCi: The compilation mentioned in the discussion of Chart 6 in this appendix; the figures for Chart 12 are there listed.

CURVE B. MEDIUM-PRICED CARS CHART 13 Year No. of Cars Year No. of Cars SOURCE: Same as Chart 4, but 1927 edition; Canadian production, how- ever, is subtracted from figures asterisked in source. 1903 1,916 1910 63,113 1904 2,872 1911 48,134 Year No. of Cars Year No. of Cars 1905 6, 293 1912 64,869 5906 1913 109,251 9,495 1903 11,235 1915 895,930 1 907 14,427 1914 82,872 5904 22,419 1916 I 52 5,578 1908 16,618 1915 207,507 1905 24,550 191 7 1,740,792 1909 38,625 1916 113,858 5906 33,500 1918 943,436 1907 43,300 1919 I 657,652 1908 63,500 1920 1,905,560 CURVE C. HIGH-PRICED CARS 1909 12 7,731 1921 1 ,452,902 1910 181,000 1922 2,313,558 1911 199,319 1923 3,566,261 Year No. of Cars Year No. of Cars 1912 356,000 1924 3,144,920 1913 461,500 1925 3,702,893 1903 1,206 1910 1 7,997 1914 543,679 1926 3,768,631 1904 1,688 1911 18,506 2905 5,842 1912 17,533 1906 7,745 1913 20,086 1907 8,672 1914 17,997 1908 7,471 1915 15,287 1909 29,939 1916 16,488 APPENDIX B 343 342 THE AUTOMOBILE INDUSTRY CHART 18 CHART 14 SOURCE: N.A.C.C., 2927 and 1926. SOURCE: Data through courtesy of Mr. George W. Sawin, manager, B. F. Goodrich Rubber Company, and Mr. 0. P. Pearson, statistician, National Automobile Chamber of Commerce. All figures are for Year Per Cent Year Per Cent casings of Goodrich make. 1915 1.5 1921 22.1 1916 1.5 1922 30.0 Date Price of Price of 1917 4.0 7923 34.0 Fabric Cord 1918 7.0 1924 . 43. 0 1919 10.3 1925 56.5 $18.70 $26.00 72.0 1919 (May) 1920 17.0 1926 2920 (March) 23.20 31.15 7921 (May) 26.00 24.50 2922 (December) 14.65 15.20 2923 (June) 14.20 25.50 CHART 19 SOURCE: Compiled from the Handbooks of Gasoline Automobiles and from other automobile price lists and bulletins. The base is shifted CHART 15 each year, as explained in the text. SOURCE: N.A.C.C., 1925 and 1926. Year Index 144.45 Type 2925 1924 1926 136.59 127.79 High pressure casings 46,000,000 40,087,529 32,372,949 192411991922232 Balloon casings 5,633p00 20,756,858 29,099,318 1925 114.23 1926 105.27 CHART 16 SoziacE: The Handbooks of Gasoline Automobiles and information re- CHART 20 ceived from individuals. SOURCE: Same as Chart 9.

CLASSES Year Per cent Year CYLINDER 4 6 8 12 1912 1.7 1913 85.7 1917 80. o% 17.8% 0 .5% 1914 1918 73-.0 23.0 0.4 92 .4 0.2 1919 71 5 26.0 2.2 1920 72.7 24.6 2.4 0.3 CHART 17 1921 78.1 19.5 2.0 0.4 SOURCE: Same as Chart 25. 1922 79.7 18.3 2.0 1923 81.6 17.4 I.o Year Per cent 1924 78 .5 20.4 1.1 1925 69.0 29.3 1.7 1923 2 .4 7926 61.0 36.8 2.2 1925 36.2 1927 90.5 THE AUTOMOBILE INDUSTRY 344 APPENDIX B 345 it CHART 2I CURVE C. HIGH-PRICED CARS SOURCE: Same as Chart 9. Year No. of Cars Year No. of Cars Year CYLINDER CLASSES 4 6 8 12 1917 21,253 1922 80,100 1918 21,766 1923 ...64,610 1917 0.9% 1919 62.7% 33.1% 3.3% 37,067 1924 49,854 0.6 1918 56.9 36.8 5.7 1920 99,978 1925 71,717 0.5 1921 1919 49.6 46.1 3. 8 96,252 1926 77,965 1920 48.0 46 .9 4.5 o.6 1921 45.1 48.9 5.0 1.0 1922 61.0 35.2 3 • 8 1923 65,3 32.6 2.1 1924 57,2 40.6 2.2 1925 47.4 49.7 2.9 1926 41.8 54.9 3.3

CHART 23 SOURCE: Same as Chart 6.

CHART 22 Price Class 1917 1918 1919 1920 1921 SOURCE: Same as Chart lo. CURVE A. LOW-PRICED CARS $675 and under 55.3 41 .6 43.5 39.6 48.1 676-$875 15.1 11.6 4.0 2.8 13.9 876-1375 19.6 33.5 27.7 25.8 20.3 Year No. of Cars Year No. of Cars 1376-1775 5.5 6.o 12.1 11.8 7.4 1776-2275 3.1 3.9 8.5 10.6 11.3 1917 1,588,100 1922 1,825,888 2276-2775 0.3 1.1 1.9 4.0 2.3 1918 826,076 1923 2,999,205 2 776-3775 0.9 1.7 2.6 3.0 4 . 7 1919 1,201,586 1924 2,744,171 3776-4775 0.1 0 . 4 0.3 1.7 1.1 1920 1,283,656 1925 2,992,176 4776 and over 0.1 0.2 0.4 0.7 0.9 1921 2,049,666 1926 3,271,015

Price Class 1922 1923 1924 1925 1926 CURVE B. MEDIUM-PRICED CARS $675 and under 56.2 62.2 59.4 51.2 5I.6 6764875 0.1 7.5 11.9 8.5 8.5 Year No. of Cars Year No. of Cars 876-1375 20.4 13.2 13.8 19.8 24.7 1376-1775 11.7 8.8 9.6 11.5 7.5 1917 256,436 1922 465,526 1776-2275 3 . 7 5.2 2.7 5.8 3.2 1918 103,678 1923 562,127 2276-2775 4.5 1 .4 I.I 1.3 2 .4 1919 359,882 1924 428,079 2776-3775 1.8 1.2 o . 8 1.0 1.3 1920 495,935 1925 701,106 3776-4775 0.9 0.4 0.6 0.5 0.5 1921 306,563 1926 508,023 4776 and over 0.7 0.1 0.1 0.4 0.3

APPENDIX B 346 THE AUTOMOBILE INDUSTRY 347 CHART 2 7 CHART 24 SOURCE: These data are based upon both the materials mentioned in the SOURCE: The source upon which this diagram is based is the questionnaire discussion of Chart 6 and upon a study of the Handbooks of mentioned in footnote 98. Automobiles and trade journal sources.

CHART 25 Length of Life No. of Length of Life No. of in Years Firms in Years Firms SOURCE: Curtis Publishing Company's Leading Advertisers, 1926. 16-18 7 Magazine 19-21 Advertisers Expenditure, 1926 22-24 8 Chrysler Sales Corporation $1,043,145 25-27 4 Willys-Overland, Inc. 1,014,730 28-30 Dodge Bros., Inc. 963,820 Buick Motor Company 855,625 Chevrolet Motor Company 842,203 Packard Motor Car Co 578,I60 CHART 28 Olds Motor Works. 524,425 Ford Motor Company 440,304 SOURCE: The same as for Chart 27. Nash Motors Company 435,225 Hudson Motor Car Company 407,80o Durant Motors, Inc. 387,423 Hupp Motor Car Corporation 383,180 CHART 29 SOURCE: Same as for Chart 27, and R. G. Dun and Company.

CHART 26 SOURCE: Same as Chart 25, for years 1926, 1923, 1919. CHART 30 SOURCE: Same as Chart 6. Automotive Passenger Year Total Car Total CHART 31 SOURCE: Same as Chart 6. 1926 $24,895,831 $11,427,386 1925 21,483,881 9,389,919 1924 19,140,953 8,875,927 1923 17,328,977 7,732,223 CHART 32 1922 12,111,877 4,780,606 SOURCE: Same as Chart 6. 1921 9,803,867 3,479,561 1920 23,958,568 7,500,525 1919 17,821,792 4,293,128 CHART 33 1918 20,868,355 2,308,567 SOURCE: Same as Chart 6. 1917 10,383,345 3,819,288 1916 8,270,316 4,301,976 1915 4,953,039 2,688,734 CHART 34 1914 4,007,217 2,070,223 SOURCE: Same as Chart 6. APPENDIX B 348 THE AUTOMOBILE INDUSTRY 349

CHART 35 CHART 36 SOURCE: These figures have been computed from the data utilized in the SOURCE: The same as Chart 6. The median figures are listed above in the preparation of Chart 6. data for Chart 35. The arithmetic mean figures follow:

NUMBEROFCANSPRODUCEDBY Number of Cars Number of Cars Year Per Plant Year Per Plant Firm Firm Year Highest at First Median at Third Lowest Firm Quartile Firm Quartile Firm 1903 439 1975 11,288 1904 379 1916 18,095 3,922 299 178 84 1 1903 632 1917 21,021 1904 3,302 319 172 33 1 1905 1905 3.920 709 3ot 96 2 1906 695 2918 12,554 1906 4,045 1,073 310 129 4 1907 2,079 1919 20,494 1907 8,423 2,204 587 2x6 25 1908 1920 22,845 008 8,487 goo 278 119 18 833 1,781 1921 16,918 2909 18,577 1.375 532 104 2 1909 010 20,677 1.765 756 243 8 1910 2,467 1922 25,629 1911 40,402 1,414 320 262 36 19xt 2,171 1923 46,486 1912 78,611 1,872 8t1 386 73 2912 1913 182,799 2.465 845 240 6 3,895 1924 49,597 1914 258,356 2,194 904 248 5 1913 5,093 1925 710002 1915 367,416 5,268 1,497 262 2 1914 6,648 1926 82,720 1916 597.956 2,076 700 7 1917 808,590 2.343 734 15 1918 350.673 1,682 516 10 1919 696,482 2,379 776 2 1920 893,621 :11J885315:35 2,209 785 2 1911 871,886 5.521 1,060 333 to 022 1./35.953 8,164 1.337 337 TO 1923 1,702.387 18,890 2,110 232 5 1924 1,585,427 19,320 2,732 511 /I 1925 1,515.939 39.930 5.640 1,053 2 1926 1,271,882 60,392 7,6/3 1.301 13 CHART 37 SOURCE: Same as Chart 6.

Year Percentage Year Percentage

1903 91.0 1915 94.7 2904 86.8 1916 94.1 1905 68.5 2917 91-7 /906 84.5 1918 90.6 2907 85 5 1919 87.5 1908 86.o 1920 92.6 1909 79.4 2921 95.3 1910 93.5 1922 95.6 1911 72.0 2923 95-1 1912 91 .9 1924 93.3 1913 93.6 1925 91.8 1914 92.4 1926 88.4 35o THE AUTOMOBILE INDUSTRY APPENDIX B 351 CHART 38 CHART 40 SOURCE: Same as Chart 6. SOURCE: United States output figures from N. A. C. C., 1927; General Motors figures through 1918 from Seltzer, op. cit.; 1928-1926 Year Percentage Year Percentage from annual reports of the General Motors Corporation.

1903 90.3 1915 90.8 NUMBER OF CARS 1904 85.3 1916 90.7 1905 65.6 1917 84.6 1906 83.6 1918 85.1 Total General Motors Year 1907 81.0 1919 77.8 U. S. Output Output Percentage 1908 85.1 1920 85.9 1909 77.1 1921 88.3 1909 530,986 30,981 23.7 1910 187,000 1910 93.3 1922 91-5 39,300 21.0 1911 210 1911 63.1 1923 90.8 ,000 35,752 17.0 1912 378,000 1912 88.x 1924 86.8 49,538 13.1 1913 485,000 46,719 9.6 1913 88.o 2925 86.3 1914 1914 94.3 1926 82.4 569,054 53,987 9.5 1925 969,930 76,068 7.8 1916 1,617,708 132,088 8.2 1917 1,868,949 342,503 17.4 19/8 1,270,686 246,834 21.0 1919 *1,974,016 391,738 19.9 1920 *2,204,947 393,075 27.8 1921 *2,660,082 2,4,709 13.0 1922 *2,655,624 456,763 17.4 1923 *4,079,992 798,555 19.6 1924 *3,606,815 587,341 16.3 1925 *4,312,456 835,902 19.4 CHART 39 1926 * 4,428,286 1,234,850 2 7.9 SOURCE: Figures from Seltzer, op. cit. through 1924; 1925-1927 computed from General Motors Corporation annual reports. All figures are Includes Canadian production. as of the beginning of each year.

Net Worth Year Net Worth Year CHART 42 SOURCE: Same as Chart 6. $232,635,137 1909 $ 9,684,491 1919 1910 17,579,203 1920 317,349,197 INCLUDING FORD 1911 31,639,119 1921 424,609,962 1912 1922 366,194,136 31,456,005 Year Per Cent 1923 32,570,578 1923 404,682,063 1924 79,27 1914 34,407,362 437,0 0 2908 1915 38,176,411 1925 466,285,209 45.0 1 67.2 1916 1926 497,284,186 909 51,477,143 1910 1917 1927 642,291,924 87.5 68,058,493 1911 2928 108,058,493 71.4 152 THE AUTOMOBILE INDUSTRY APPENDIX B 353 will and patents in my computation, but have included all other EXCLUDING FORD assets, less liabilities to all others than stockholders and bond- holders. Thus the net worth figures, with allowance for some Year Per Cent I Year Per Cent variation in accounting methods as between companies, are prac- tically the equivalent of "invested capital," at least, are sufficiently 1903 71 .4 1908 51.7 so for the purposes at hand. The Ford profits figures for the 1904 79.3 1909 74. 8 years 1922, 1923, 1924, 1925, and 1926 not being available, I 1905 79.o 1910 99.8 have estimated by taking the difference between the net worth 1906 69.o 1911 98.3 of each year and that of the year preceding. This procedure 1907 68.6 may, of course, understate the Ford earnings, for it ignores en- tirely whatever may have been withdrawn as dividends by the Ford family; it is, however, all that one can do by way of esti- mate. So far as the general public is aware, no very large sums CHART 42 seem to have been invested by the Fords in other firms or indus- SOURCE: Same as Chart 6. tries during these last few years; but one does not know, of

FORD MOTOR COMPANY* Year Percentage Year Percentage

1903 6 . 8 1915 41.5 Percentages of Net 1904 7.6 1916 41.8 Year Ending Receipts Net Worthf Net Profits Profits to 1905 8.4 1917 46.4 Net Worth 1906 5 . 5 1918 37.2 Sept. 30,2904 $ 1,336,800 $ 100,000 $ 283,037 283.0 2907 22.0 1919 43 6 30, 1905 1,914,905 220,758 290,194 131.5 1908 13.6 192o 48.5 " 30, 1906 1,491.626 231,807 202,398 44.2 1909 10.0 1921 66.0 " 30, 1907 5,773,851 297,867 1,124,675 377.6 1910 11.3 1922 48.2 " 30,1903 4,701,298 1,038,822 1,150,983 110.8 " 30,1909 9,041,291 2,028.553 3,125,876 126.8 191.1 24.5 1923 46.5 " 30,1910 16,711,299 2,101,723 4,511,510 215.2 1912 34.9 1924 49.3 " 30, 1911 24,656,768 4,406,961 6,275,031 140.5 1913 46.2 1925 40.5 " 30, 1912 42,477,677 9,956,535 13,057,312 132.1 1914 48.4 1926 33.0 " 30,1913 89,r08,885 26,867,386 25,046,767 148.5 " 3o, 1914 119,489,417 30,259,224 20,338,455 100.3 July 3x,1915 121,200,871 53,875,226 24,641,423 45.7 " 21,1916 206,867,317 61,135,771 50,994,918 98.1 " 31,1917 274,575,052 11400,908 26,314.057 23.4 " 32, 1918 CHARTS 43, 44, 45 308,719,034 133,604,907 30,324,057 22.7 " 32, 1919 305,637,115 156,288,721 69,92 4,411 32 .7 SOURCES: See Note 174. The figures are based either on Lawrence H. Seltzer, April 30,1920 429,866,863 202,135,296 53,448,480 23.3 Dec. 31,1921 546,049,450 142,529,641 75,890,396 55.7 Some Chapters on Capital in the Automobile Industry, Tables 28, April 3,2,19221. 237,000,000 181,200,0001 76.51 29, 5o, 52, 54, 57, 59, 61, 62, an unnumbered table on p. 255; Dec. 3r, 19231 440,000,000 127,800,0001 29.0$ Poor's Manual, issues of 1923 and 1925, analyses of the Ford 2 31,1924 539,000,000 99,000,000$ 18.31 " 32 , 2925 666,279,955 82,086,0951 12..11 Motor Company; Moody's Manual of Investments for various " 32, 2926 733,913,346 67,615,3915 9.2$ years, or the annual reports of the several corporations here In- cluded. The Ford net worth figures which I have computed from *Profits figure for 2922, 1923, 1924, 1925 and 1926 are estimated by the present writer. the balance sheets shown in Those for 1909 and 192o are estimated by Seltzer. His footnotes explaining his estimates Poor's and Moody's are gross assets and the several shifts in fiscal periods are here omitted, as well as a note to the x919 net less good will, minus all liabilities of the corporation to all others worth figure. than those to shareholders. Seltzer's figures for the various net (Includes Lincoln Motor Company, 2922-1926. Estimated as explained above. worths in some instances include patents and good will, but these §Four-month period ending April 3o, 2922. items are in all those cases insignificant. I have excluded good rriventy-month period ending December 3x, 1923. 354 THE AUTOMOBILE INDUSTRY APPENDIX B 355

course, what has been employed in private investments or in CHART 46 personal expenditures. The absolute figures are not given except for the Ford Motor SotracE: Automotive averages compiled by the writer. Industrials and Company. The percentages which I have either taken or com- Rails figures are from the Annalist, first quarterly review number, puted from the various sources above mentioned, however, follow. April 15, 1927. For most years, the Ford Company's volume of sales also is shown. AUTOMOTIVE STOCKS INDUSTRIALS AND RAILS PERCENTAGE OF NET PROFITS TO NET WORTH YEAR Low High Low High

Reo Packard Hudson 1917 $ 43.65 $ 71.32 Motor Stude- Nash Dodge $ 57.47 $ 90.46 Motor Motor General Willys- 1918 Year Car Car Motors Overland Car baker Motors Brothers, 55.42 76.95 64.12 80.16 Com- Com- Cor- Com- Com- Cor- Com- Inc. 1919 91.20 185.15 68.73 99.59 pany pany poration* pany pany poration pany 1920 7r.so 121.87 62.70 94.07 1921 33.35 73.21 0905 41.7 63.7 58.35 73.13 1922 32.06 85.22 1906 43.9 77.5 66.21 93.06 1923 1907 63.9 64.9 71.61 110.45 77.15 92,52 68.9 43.0 2908 1924 79.55 114.07 82.26 307.23 49.2 94.11 1909 IoI . 9 1925 103.10 EDI. 16 1910 67.9 23.2 57-84 88.6 297.40 13Fl.21 1926 2911 19.7 10.8 10.48 41,4 213.82 344.04 509.63 142.35 1912 16.1 19.4 12.39 48.7 1913 29.0 16.5 22.90 40.9 37.4 1914 49. 2 8.2 21.07 30.2 39.0 1915 38.2 18.9 27.87 38.5 35.3 1916 40.9 24.7 55.93 16.7 37.5 1917 26.4 18.6 57.05 10.5 17.2 27.1 13.1 1018 24.9 16.8 13.72 8.7 19.5 52.7 1919 17.2 12,2 25.79 4.4 20.4 43.2 192o 38.2 13,1 11.90 18.91 9.9 39.9 28.8 292! 6.o 2.31 9.1ot 34.ot 7.3 11.7 12.4 4.6 1922 19.0 4. 8 14.05 42.81 43.9 18.2 31.5 35.4 2923 28.1 15.0 15.33 22.9 35.3 16 .9 35.4 18.1 1924 16.2 10.6 /0.37 4.9 30.2 12.1 30.0 24.7 1925 20.1 26.5 24.5 19.9 54.9 19.1 A8.1 19.1 1926 15.2 29.9 31.9 4.4 73.7 11.8 45.4 23.8

"Includes, throughout either all or a part . OI the period, the fol owing passenger car companies, in addition to several truck and parts making firms: Buick Motor Company, Cadillac Motor Company, Olds Motor Works, Oakland Motor Company, Motor Car Company, Cartercar Company, Elmore Nlanufacturing Company, Ewing Automobile Company (all acquired 1908-2910), Scripps-Booth Corporation (acquired 1915), Chevrokt Motor Company (acquired 1917), and Sheridan Motor Car Company (organized and acquired 192o). t Net loss. 356 THE AUTOMOBILE INDUSTRY APPENDIX B 357

CHART 47 ALL COMPANIES, FORD EXCLUDED SOURCE: The data for this chart arc those of Charts 43, 44, and 45, plus data for the Pierce-Arrow Motor Car Company. The net worths and net profits, respectively, of all companies included Year Total Net Worth Total Income Percentage in those three charts were added together for each year and the 46.5 percentages of aggregate profits upon aggregate net worths then 1910 $ 32,480,552 $ 15,092,562 1911 5,717,605 computed. Both the absolute figures and the percentages obtained 481468,368 11.8 1912 here follow. Also, there is given the number of companies in- 47,152,861 7,354,406 i5.6 1913 65,888,093 cluded each year, counting each producing unit of General Motors 17,409,603 26.4 1914 76,038,908 18,048,005 23.7 as a separate company. 1915 93,922,278 32,802,774 34.9 ALL COMPANIES, FORD INCLUDED 1916 176,200,924 59,542,686 33.8 1917 212,529,498 61,941,029 29.1 1918 267,516,315 36,025,767 13.5 Number of 1919 450,555,758 12,5,698,092 27.9 Year Companies Total Net Worth Total Income Percentage /920 577,194,416 63,832,308 11.0 1921 744,939,275 52,255,983* --.07* 1922 728,510,848 10.9 1910 12 $ 34,582,2 75 $ 19,614,072 56.4 79,408,004 1923 1911 II 52,875,329 11,992,636 22.6 769,884,560 137,538,444 17.9 1912 9 57,109,396 20,411,718 33.9 1924 835,325,197 109,335,106 13.1 1925 1913 10 82,755,479 42,456,370 51.3 934,111,952 235,529,245 25.2 1926 1,104,181,642 296,560,026 1914 10 106,298,122 38,386,460 36.1 26.9 1915 11 147,797,504 57,444,197 38.9 1916 10 237,336,695 119,537,604 50 .4 Deficit. 1917 12 326,590,406 88,255,086 24.1 1918 12 401,121,222 66,339,824 16. 5 1919 13 606,844,479 195.'622,503 32.2 1920 14 779,329,712 117,280,788 15.0 1921 15 886,468,916 23,634,413 2.7 1922 15 965,510,848 260,608,204 26.9 1923 14 1,209,884,560 265,338,444 21.9 1924 14 1,374,325,197 208,335,506 15.2 48 1925 14 1,600,139,907 317,615,340 19.8 CHART 1926 14 1,838,094,988 364,175,417 29 .8. SOURCES: Automobile production figures are those given for Chart £3. Income figures are from National Bureau of Economic Research, News-Bulletin No. 23, February 21, 1927, and here follow. INCOME PER PERSON GAINFULLY EMPLOYED

Year 1913 Dollars Year 1913 Dollars

1919 934 1923 1113 192o 907 1924 1121 1921 887 1925 1165 1922 979 1926 /186 THE AUTOMOBILE INDUSTRY 358 APPENDIX B 359

CHART 49 CHART 51 Souacx: Figures furnished by Automotive Division, United States Depart- SOURCE: N.A.C.C., Foreign Trade Bulletin, No. FT 256. ment of Commerce. Persons per Persons per No. of No. of Country Motor Vehicle Country Motor Vehicle Vehicles Vehicles Exported Year Quarter Exported Year Quarter United States 5.3 Spain 256 New Zealand 11 Brazil 293 1923 First 31,316 /026 First 82,496 Australia 16 Egypt 810 Second 45,205 Second 78,987 Argentina 43 Japan 1,656 Third 36,670 Third 69,759 Uruguay 59 India 2,470 Fourth 38,705 Fourth 73,931 Holland loco China 25,500 Germany 196 1924 First 46,858 1927 First 98,941 Second 48,007 Second 115,494 Third 40,133 Fourth 43,630

1925 First 62,358 CHART 52 Second 79,112 Third 76,913 SOURCES: Ford figures from same source as Chart 6; Chevrolet figures from 5926 annual report of General Motors Corporation. Both series Fourth 84,554 include Canadian production.

Ford Chevrolet Production Production Year Number of Number of Passenger Cars l'assenger Cars CHART 50

SOURCE: Automotive Division, United States Department of Commerce. 1922 1,157,783 2 40,390 1925 1,764,994 464,800 1924 1,643,292 295,456 Passenger Car Percentage of 1925 1,587,821 466,485 Registration World's Total 1926 1,353,243 620,364 Country as of December 31, Registration of 1925 20,837,116 Cars

United States 17,442,638 83 7 Canada 639,695 3 . r 566,000 2.7 United Kingdom TABLE I France 450,000 2.2 Australia 243,055 1.2 SOURCES: The figures presented in this table have been prepared from the Germany 215,150 I.0 materials mentioned in the discussion of Chart 6 in this appen- Argentina 165,000 8 dix, and through a checking of the Handbook of Gasoline Auto- Balance of World 1,115,608 53 mobiles, the files of trade journals, and the consultation of miscellaneous other sources. APPENDIX C

HISTORICAL MATERIALS; LISTS OF COM- PANIES, ASSOCIATIONS, AND TRADE JOURNALS z. Articles of Agreement of the Association of Licensed Automobile Manufacturers

ARTICLES OF AGREEMENT Whereas, several of the parties hereto own Letters Patent of the United States for improvements in automobiles, and parts used on or in connection with the construction thereof, and all of said parties are actively engaged in the manufacture and sale of automobiles; and Whereas, it is mutually desired to protect the rights of each party hereto under said Letters Patent against infringements thereof and against attacks upon the validity thereof, and also to protect each of the parties hereto in the right to manufacture and sell automobiles embodying inventions owned or controlled by the parties hereto, which inventions, in construction or design, are patented or otherwise; and Whereas, the Electric Vehicle Company, hereinafter known as the "Vehicle Company," a New Jersey corporation, is the exclu- sive Licensee under Letters Patent No. 549,16o, granted Novem- ber 5, 1895, to George B. Selden with rights to sublicense there- under: Now Therefore, in consideration of your mutual promises and undertakings herein set forth, and of the granting by the Vehicle Company of a license under said Letters Patent No. 549,16o to each of the signators hereto, and of the sum of one dollar each to the other paid, the receipt whereof is hereby acknowledged, it is agreed as follows: 361 APPENDIX C 362 THE AUTOMOBILE INDUSTRY 363

I. thereby represented by said member, and the vote of such sub- stitute shall be binding on the party he represents. Meetings of That the parties hereto, including in said terms all parties who said Board may be called at any time by the president, and shall may be hereafter admitted as parties hereto, do hereby and under be called by him on the request of five members in writing, on this agreement associate themselves together on the terms and con- at least ten days notice in advance by mail. ditions hereinafter set forth, as the "Association of Licensed Auto- mobile Manufacturers." 4. 2. Said Board shall elect from its members the following to be That the parties hereto, and those hereafter admitted as par- officers and known to be officers of the Association, and fix the ties, shall create a Board of Managers composed of a representa- compensation thereof. A president, vice-president, secretary and tive of each of the parties hereto, which Board shall be known treasurer, and if the Board shall so decide, the offices of secretary as the "Board of Managers of Licensed Automobile Manufac- and treasurer may be held by one and the same person, and may turers," and hereafter called the "Board," which shall have the provide for the appointment or election of other officers, as it powers and perform the duties hereinunder mentioned. may from time to time designate. All matters which may come It shall also have power by a three-fourths () vote of all of before said Board shall be decided by a two-thirds (M) vote of its members, to make any rules or regulations which may in its all the members thereof, except as herein otherwise provided. judgment be necessary for carrying on business under the licenses, Said Board shall have an office in the City of New York, State and generally for promoting the purpose of the Association, and of New York, and shall hold its regular meetings at such office, may also by like vote provide penalties for any violation of such or at such other place as shall be previously designated by said rules or regulations, and in case by such vote a cancellation of Board or its officers or committees, or as may hereafter be more the license of any offending party shall be requested, then and in specifically prescribed. Said Board shall make such by-laws as that event the Vehicle Company will cancel such license, but the shall be deemed necessary in order to carry out the powers con- Vehicle Company shall not be required, without its consent, to ferred upon it in and by this contract. cancel more than one such license in the course of any one cal- endar year. 3. Said Board is authorized and hereby empowered to employ a Each of the parties hereto shall annually appoint from its General Manager, and all necessary clerical assistance to carry officers or stockholders one (r) person who shall be its repre- on the work entrusted to it, and perform its obligations here- sentative on said Board, who shall hold office for the period of under, and may require from its officers, their assistants and one ( r) year, or until his successor is elected. Said Association agents, sufficient and proper security for the performance of the Board shall hold its first meeting at New York, in the State of duties to be severally performed by them. New York, on the fifth day of March, 1903, and the term of 6. office of the first members of said Board shall date from such first meeting; each and any of the parties hereto, or who shall Said Board shall keep accurate records of its proceedings and become parties hereto, shall fill any vacancy arising from the books of account, and shall make reports to the parties hereto death, resignation, or otherwise of its members on said Board; of all acts and doings under this contract, and of all receipts and each member may appear and vote in person or by proxy, and disbursements, at least every six months during the continuance such proxy shall be by some officer or stockholder or the party hereof. 364 THE AUTOMOBILE INDUSTRY APPENDIX C 365

7. royalties under the Selden patent, to pay all future charges for litigation under Letters Patent No. 549,16o, retainers and services Said Board is hereby authorized and empowered to appoint of counsel and experts, and other expenses of the Association, the from its members an executive committee of five (5), of whom Vehicle Company, as an individual, to be relieved of all such the Vehicle Company shall always be entitled to appoint one, a expenses in view of its joint contribution to this Association of majority of whom shall constitute a quorum, which executive Licensed Automobile Manufacturers. The funds for this purpose committee may be authorized to exercise the powers and duties to be dispensed under the order of the executive committee. of said Board, as herein determined, to such extent and on such occasions and under such circumstances as may from time to time be delegated to it by said Board. The Vehicle Company hereby agrees with the other parties 8. hereto, and it is mutually covenanted and agreed between all Nothing herein contained shall be construed as operating to the parties hereto, that the executive committee shall and is deprive any of the parties hereto of the full right, title and inter- hereby empowered to determine to whom licenses from Vehicle est in any and all inventions or Letters Patent now owned or con- Company under said patent No. 549,16o are or are not to be trolled, or which may hereafter be acquired by them, or estopping granted, and the rates of 'royalty upon which they shall be or preventing them from enforcing such rights against any other granted. No license shall be granted by said Vehicle Company party hereto, nor shall anything herein contained be held to be under said Letters Patent without the unanimous consent in writ- acknowledgment by any party hereto of the validity of any pat- ing of the executive committee, nor at a less royalty rate than ents of any other party hereto, excepting the aforesaid Selden one and one-quarter OW per cent of the catalogue price of patent No. 549,16o. completed vehicles, as provided in Article 4 of the license. The executive committee may furthermore determine and prescribe a 9. limitation of future license to any particular type or types of Each member of the Association (including Electric Vehicle vehicle which the licensee shall have the right to manufacture Company) shall pay a royalty under the Selden Patent of one under said Letters Patent. Upon the grant of any such licenses and one-quarter (W) per cent on the catalogue price of all under the Selden patent No. 549,16o, the Licensees shall be en- vehicles manufactured by it under said patent, as provided in its titled to become members of this Association, upon signing this form of license, a copy of which is hereto annexed, said royalty agreement and upon making the payment required by Article 16 to be paid to the Electric Vehicle Company, and that Company hereof. If the executive committee shall determine that a license is to retain for its own use three-fifths (34) thereof, and to pay is not to be granted to any party, such license may, notwith- over to the Association two-fifths () thereof, within ten days standing, be granted on the written consent of two-thirds of the after its receipt by Electric Vehicle Company, as provided in Board of Managers. said license. I2. to. The executive committee shall and is hereby authorized to The parties hereto, as an Association, do all and severally determine what infringements of said patent No. 549,16o shall agree, in consideration of the covenants and terms of license agreement of even date granted by Vehicle Company to them, be prosecuted, and shall generally, subject to advice of counsel, control the policy, scope and expenses of such litigation, so long that they will and hereby assume and pledge themselves to the extent of the funds received by said Association as its share of as the Association defrays all the expenses thereof, and under 366 THE AUTOMOBILE INDUSTRY APPENDIX C 367 the conditions that all suits are to be prosecuted in the name determined shall be paid to said Association, as it shall from time of the Vehicle Company and by attorneys, solicitors, and counsel to time require, to meet the portion of actual expenses from time named by it, but the Committee may employ additional associate to time incurred. counsel. 15. 13. It is mutually agreed, between the Vehicle Company and the The executive committe is hereby authorized and empowered other parties hereto that the litigation between the Vehicle Com- in its discretion, and upon the request or consent of any party pany and the Winton Motor Carriage Company now pending, hereto, to cause to be commenced and prosecuted any and all is to be terminated by the latter accepting a license at the rate suits under any Letters Patent, except the Selden patent No. and under the terms and conditions hereinbefore prescribed, and 549,160, owned and controlled by such party for the infringe- in accordance with form of license hereto attached; provided, ment thereof by any person or corporation not a party hereto, however, that out of the royalties payable to the Vehicle Com- and shall have the exclusive control and management of such pany under such license for its own use it may rebate from time actions, suits, and proceedings, except in the matter of damages to time, as such royalties become due, the expenses incurred by or compromise for past infringement, or amounts, rates or terms said Winton Company in said litigation, and such Vehicle Com- of license for further use, which latter shall be subject to consent pany shall also accord like treatment to any and all parties hereto and approval by the party or parties hereto owning or controlling who have contributed any moneys toward the defense by the such patent rights; and, on request of any party hereto, to defend Winton Company of such litigation. any suit, action or proceeding, except one under Selden patent No. 549,160, which may be commenced or threatened against r6. any party hereto by any person, firm, or corporation not a party Each of the parties hereto shall deposit in the treasury of this hereto for the infringement of any Letters Patent, except one Association, immediately upon becoming a party hereto, the sum under Selden patent No. 549,160; and shall have exclusive con- of Two Thousand Five Hundred Dollars ($2,500) for the general trol and management of said suit, action, or proceeding instituted expenses of the Association. If any party hereto shall fail to or defended by it under the powers herein conferred, and to pay perform its agreements and undertakings hereunder, then said all legal and other expenses of such litigation out of the funds monies so deposited by it or any balance thereof remaining and of the Association so far as is hereinafter provided. any other monies or assets which may be held by the Association in trust or for the mutual benefit of said party with all the other 14. parties hereto, shall be forfeited to said Association; but before Bringing or defending of any such suits as provided in above any such forfeiture shall be declared said party shall be cited Articles 12 and 13 is to be subject to the approval of the Board. to appear before said Board, or a committee thereof composed In suits provided for in Article r3, the Board shall determine of not less than five members, at a certain time and place, and in advance the proportion of all expenses thereby incurred or to show cause why its said money and interests should not be for- be incurred which shall be paid by the individual party or parties feited, and the action of said Board or of such committee, ap- who own or control the patent rights involved and the propor- proved by a vote of the Board after such hearing, shall be in tion thereof that shall be paid from the common funds of the all things final and conclusive. Associated Licensees, which determination shall be final, and the share to be borne by such party or parties hereto when so 17. It is furthermore mutually agreed that if any party shall cease 368 THE AUTOMOBILE INDUSTRY APPENDIX C 369 to be a Licensee under Letters Patent No. 549,160 by reason of tive committee or officers, shall be distributed pro rata with the the forfeiture of its license under the terms and conditions thereof, amount contributed by each party hereto then represented in or for good and sufficient reason, as more specially provided for said Association, and any suits, actions, proceedings, or any in the license agreement, a copy of which is hereto attached, litigation then remaining shall be transferred and surrendered to such party shall forthwith cease to be a party hereto, and with the particular parties hereof therein interested, and who hereby the cancellation and termination of said license agreement all its obligate themselves to thereafter assume the entire control of rights, benefits, and privileges hereunder shall cease, and all its expenses or other obligations. interests as an Associated Licensed Manufacturer in the assets of such Association of Licensed Automobile Manufacturers shall 2 O. cease. The executive committee shall have power from time to time r8. to distribute pro rata among the then members, in proportion to A declaration of forfeiture, as above provided in Articles i6 their contributions, any funds in the treasury in excess of the and 17, shall terminate all rights, benefits, and privileges of said obligations and needs of the Association. offending party under this agreement, and all its interest in the In Witness Whereof, the several parties hereto have hereunto Association and the assets thereof, and shall relieve each and all affixed the signatures of their corporations, by their officers, there- of the other parties hereto from duties, liabilities, or obligations unto duly authorized, or by their duly accredited representative, hereunder to said offending party, and the several parties hereto this fifth day of March, 1903. then remaining shall stand to said offending party in the same Electric Vehicle Co. position, and shall have the same rights as against said offending . H. Day, Pres't. party as if this contract had not been made, and said offending Olds Motor Works party had at no time been a party hereto; but such termination by Fred L. Smith, Sec. & Treas. shall not operate as to said offending party to in any manner affect any obligations under these presents as between the parties The Auto-car Company remaining, and as between them it shall continue in force as if by John S. Clark, Sec. & Treas. said offending party had at no time been a party hereto. The George N. Pierce Co. by Charles Clifton, Treas. r9. Packard Motor Car Co. This agreement and mutual covenants and agreements herein by Henry B. Joy, Vice Pres. shall continue in force until the fifth day of November, 1912, Apperson Bros. Automobile Co. unless sooner terminated. This contract may be terminated, and by Elmer Apperson the parties hereto shall be relieved of all obligations hereunder, upon a vote of a majority of the parties hereto at any time after Larchmont Automobile Co. said Letters Patent No. 549,160 shall have expired or have ceased Barclay H. Warburton, Chair. Ex. Corn. to be effective in view of a decree of any court of last resort. Knox Automobile Co. Upon the termination of this agreement and dissolution of said E. H. Cutler, Pres. Association for any cause, the monies and assets of any kind Locomobile Company of America remaining after the payment of all obligations contracted in be- by S. T. Davis, Jr. President. half of the parties hereto by their duly appointed Board or execu-

McreMsotezeoev 011111RION•immarmassaamoilknowia"..4b, . 37o THE AUTOMOBILE INDUSTRY APPENDIX C 37r The Haynes-Apperson Co. Buffalo Gasoline Motor Co. by Elwood Haynes, Pres. A. Snyder, Sec'y. The Peerless Motor Car Co. Pope Manufacturing Co. by L. H. Kittredge, Sec'y & Treas. by Albert A. Pope, President. The Winton Motor Carriage Co. Sandusky Automobile Co. Geo. H. Brown, Sec'y. Jas. J. Huicle, Pres. U. S. Long Distance Automobile Co. Crest Manufacturing Co. Lewis Nixon, Prest. by Henry W. Lamb, President. Waltham Mfg. Co. July 2, 1904. Studebaker Automobile Co. Harrison Williams, Prest. by Geo. W. Studebaker, Pres. International Motor Car Co. Worthington Automobile Co. Albert A. Pope, Prest. by W. J. P. Moore, Vice Pres. The J. Stevens Arms & Tool Co. Buick Motor Co. I. H. Page, Pres. & Treas. by Hart 0. Berg, Prest. (Endorsed.) H. H. Franklin, M'f'g. Co. H. H. Franklin, Treas. Charran Girardot & Voigt Co. of America 2. Agreement Executed between the Electric Vehicle A. D. Proctor Smith, Vice Prest. Company and the Winton Motor Carriage Com- April 24, 1903. The Commercial Motor Company pany James E. Woodbridge, Prest. LICENSE AGREEMENT April 28, 1903. Berg Automobile Co. WHEREAS, The Electric Vehicle Company, a New Jersey cor- by Hart 0. Berg, Prest. poration, party of the first part, is exclusive licensee under Letters Cadillac Automobile Company Patent of George B. Selden, dated November 5, 1895, No. 549,- by Lem. W. Bowen, Secretary. 16o, for an improved road engine, and has also exclusive power Northern Manufacturing Co. to grant sub-licenses under the same; and by W. T. Barbour, President. WHEREAS, The Winton Motor Carriage Co., a corporation of Pope-Robinson Co. the State of Ohio having its principal office at Cleveland, Ohio, by John T. Robinson, Prest. party of the second part, is desirous of acquiring a license under said Letters Patent; and Elmore M'f'g Co. J. H. Becker, Sec'y & Mgr. WHEREAS, an Association of Licensed Manufacturers under said patent has been formed by an agreement, a copy of which is E. R. Thomas Motor Co. by E. R. Thomas, Prest. hereto annexed, to which the party of the second part is or is to be a party; The Kirk Manufacturing Co. Ezra E. Kirk, President. Now, THEREFORE, it is agreed as follows:

172,PART,K.

372 THE AUTOMOBILE INDUSTRY APPENDIX C 373 T. The Electric Vehicle Company, in consideration of the due or otherwise disposed of, not included in any previous account, performance of all of the agreements herein on the part of the and the catalogue price of the same, and shall within ten days party of the second part, hereby grants to the party of the sec- thereafter pay to the party of the first part all of the royalties ond part a license to manufacture vehicles under said Letters due therefor to the party of the first part, as aforesaid, which Patent, at Cleveland, Ohio and not elsewhere without the written shall not have been prepaid; and the first of such statements consent of the licensor, to the full end of the term for which shall include all vehicles sold or otherwise disposed of from Janu- said patent has been or may be granted, unless terminated as ary r, 1903. herein provided for. 6. The party of the second part is to keep books of account, 2. Nothing herein contained shall be constructed as involving giving full particulars of the licensed business, and permit the a license by implication, estoppel, or otherwise under any other party of the first part, at all reasonable times, to inspect the same Letters Patent now or hereafter owned or controlled by the party and the premises where the licensed business is carried on. of the first part. 7. The party of the second part admits the novelty of the in- 3. The party of the second part is to pay the sum of One vention of George B. Selden claimed in said patent No. 549,16o Thousand Dollars, in advance, on account of royalties specified and the validity of the claims thereof and the exclusive rights herein. of the party of the first part thereunder, and will not while this 4. The party of the second part is to pay a license fee on each license remains in force, directly or indirectly contest the same and every vehicle manufactured under this license at the rate or aid others in so doing. of one and one-fourth (11/4) per cent of the catalogue price of 8. The party of the second part will mark all vehicles made the same, as completed, including running gear, frame, motor, by it with the date and number of said Letters Patent and with connections, body, trimmings and cushions, all in finished condi- the fact that it is licensed thereunder. tion ready for use; three-fifths (3A) of said license fees or royal- 9. If the party of the second part shall fail to comply with ties shall be retained by said licensor for its own use and the any of its agreements herein contained or shall fail in any cal- remaining two-fifths (75) thereof shall be paid over to said endar year commencing from the first quarter day after the date Association of Licensed Manufacturers by said licensor within hereof to pay royalties to the amount of One Thousand Dollars ten days after receipt thereof by said licensor, for the purposes ($1,000), the party of the first part may cancel all the rights of said Association, as set forth in the agreement hereto annexed, or any amendments thereof that may from time to time be made of the licensee hereunder by giving thirty days' written notice to that effect; but the party of the second part shall not be thereby by the parties thereto. No incomplete vehicles nor running gears relieved from any obligations which has arisen before the giving are to be sold hereunder without the previous written permission of such notice. of the party of the first part, and on payment of royalty, based on selling price of vehicle when completed. But this provision To. This license shall not be assigned, divided, or shared with shall not prevent the bona fide replacement or repair of parts of any person or persons whatsoever without the written consent of vehicles on which royalty has been paid. the party of the first part. 5. The party of the second part within the first ten days of t. The licensor will, while this license is in force, in con- January, April, July, and October in every year is to furnish the junction with the Association of Manufacturing Licensees under party of the first part and also the Association written statements said agreement, as therein provided, use all reasonable and proper under oath, showing the number and kinds of vehicles made, sold means to prevent infringement of said Letters Patent. and bring and diligently prosecute such suits or proceedings as may be 374 THE AUTOMOBILE INDUSTRY APPENDIX C 375 advised by counsel employed, as specified in said agreement. 3. Racing Records If in any such suit it shall be adjudged by any Circuit Court (From Automobile Trade Journal, December 1, 1924) of Appeals of the United States, after a final hearing on testi- mony, that said Letters Patent are invalid, or so limited in scope VANDERBILT CUP that vehicles substantially like those which have been manufac- First race, Long Island, N. Y., October 8, 1904; distance, 284.4 tured and sold by the licensee hereunder may thereafter be made miles. Won by Heath, Panhard; time, 5.26.45; average, 52.2 and sold without infringing any valid claim of said Letters m.p.h. Patent, or in case any like decree should be made in any court Second race, Long Island, N. Y., October 4, 1905; distance, 283 of the United States by a decision not appealed from within the miles. Won by Hemery, Darracq; time, 4.36.08; average, 61.49 time allowed by law, then and thereafter the licensee may, at its m.p.h. option, cancel all its future rights and obligations under this Third race, Long Island, N. Y., October 6, 1906; distance, 297 license by serving thirty days' written notice to that effect, but miles. Won by Wagner, Darracq; time, 4.50.10; average, 61.43 such notice shall not impair the obligation of the licensee here- m.p.h. under up to the time of the expiration of said notice. Fourth race, Long Island, N. Y., October 24, 1908; distance, 12. This license is granted subject to the provisions of the 258.06 miles. Won by Robertson, Locomobile; time, 4.00.48; agreement of the Association of Licensed Manufacturers, a copy average, 64.38 m.p.h. of which is hereto annexed (or any amendments thereof which Fifth race, Long Island, N. Y., October 3o, 1909; distance, may from time to time be made by the parties thereto), and any 278.08 miles. Won by Grant, Alco; time, 4.25.42; average, 62.77 violation by the licensee of any obligations arising out of said m.p.h. agreement or from its having become a party thereto, or any dis- Long Island, N. Y., October 1, 1910; distance, obedience of or failure to comply with any regulation or require- Sixth race, 278.08 miles. Won by Grant, Alco; time, 4.15.58; average, 65.18 ment duly adopted by said Association, or the Executive Com- m.p.h. mittee thereof, or any failure of the licensee at any time to be a member in good standing, as duly determined by said Association, Seventh race, Savannah, Ga., November 27, 1911; distance, 291.38 miles. Won by Mulford, ; time, 3.56.00; average, shall entitle the licensor to cancel all rights of the licensee here- 0 under, by giving thirty days' written notice to that effect, but 74. 7 m.13.11. the licensee shall not thereby be released from any obligations Eighth race, Milwaukee, Wis., October 2, 1912; distance, 299.54 hereunder to the licensor. miles. Won by De Palma, Mercedes; time, 4.20.31; average, 68.97 m.p.h. In Witness Whereof, the parties hereto have caused their names Ninth race, Santa Monica, Cal., February 26, 1914; distance, and seals to be hereunto affixed this fifth day of March, 1903. 403.248 miles. Won by De Palma, Mercedes; time, 3.53.41; THE WINTON MOTOR CARRIAGE CO. average, 75.49 m.p.h. By ALEXANDER WINTON, Tenth race, San Francisco, Cal., March 6, 1915; distance, 300.3 President. miles. Won by Resta, ; time, 4.2 7.37; average, 67.2 m.p.h. GEO. H. BROWN, Eleventh race, Santa Monica, Cal., November 18, 1916; dis- Secy. tance, 294.03 miles. Won by Resta, Peugeot; time, 3.22.48; ELECTRIC VEHICLE CO. average, 86.90 m.p.h. GEO. H. DAY Prest. APPENDIX C 377 376 THE AUTOMOBILE INDUSTRY 4. List of Passenger Automobile Manufacturing Com- GRAND PRIZE panies, 1895-1927 First race, Savannah, Ga., November 26, 1908; distance, 402.08 miles. Won by Wagner, Fiat; time, 6.10.31; average, 65.08 m.p.h. The following list includes the •principal American companies Second race, Savannah, Ga., November 12, 1910; distance, known actually to have engaged in the production and sale of 415.2 miles. Won by Bruce-Brown, Benz; time, 6.03.05; average, passenger automobiles upon a commercial scale over the period 70.55 m.p.h. 1895-1927. When a company's name has been changed one or Third race, Savannah, Ga., November 3o, 1911; distance, more times, the last name employed is the one given. Holding 411.36 miles. Won by Bruce-Brown, Fiat; time, 5.31.29; aver- companies are designated by asterisks, and the makes of cars age, 74.45 m.p.h. which they control are given in footnotes. When the company Fourth race, Milwaukee, Wis., October 5, 1912; distance, 409 name does not include the name by which its car is, or was, miles. Won by Bragg, Fiat; time, 5.59.27; average, 69.3 m.p.h. known, the latter is shown in parentheses. The letter "B" fol- Fifth race, Santa Monica, Cal., Feb. 23, 1914; distance, lowing the year of exit indicates known bankruptcy or court pro- 403.248 miles. Won by Pullen, Mercer; time, 5.13.30; average, ceedings. Some of the companies not so marked may also have 77.2 m.p.h. failed in the technical sense, but the fact of bankruptcy in some Sixth race, San Francisco, Cal., February 27, 1915; distance, of these cases has not been satisfactorily checked and no "B" is 400.28 miles. Won by Resta, Peugeot; time, 7.07.57; average, therefore appended. I am indebted to Mr. W. L. Powlison and 57.5 m.p.h. Mr. G. C. Arvedson for aid in checking the list for this purpose. Seventh race, Santa Monica, Cal., November 18, 1916; distance, Allen Motor Company, Columbus, Ohio, 1914-1922. B. 403.248 miles. Won by Wilcox-Aitken, Peugeot; time, 4.42.47; American Locomotive Company (Alco), New York City, 1909-1914. average, 85.59 m.p.h. American Motor Car Company, Cleveland, Ohio, 1908-1910. American Motors Company, Indianapolis, Indiana, 1913. B. INDIANAPOLIS SPEEDWAY Anderson Motor Company, Rock Hill, South Carolina, 1919-1925. B. Distance, 500 Miles Apperson Brothers Automobile Company, Kokomo, Indiana., 1003- Year Car and Driver Time M.P.H. 1925. B. 1911-Marmon Harroun 6 42.08 7459 Electric Vehicle Company, Saginaw, Michigan, 1913-1916. 1912-National, Dawson 6 21.06 78.7o Atlas Motor Car Company, Springfield, yassachusetts, 1909-191o. B. 1913-Peugeot, Goux 6 35.05 76.92 Company, Auburn, Indiana, 1912, 1914-Delage, Thomas 6 03.45 82.47 Austin Automobile Company, Grand Rapids, Michigan, 1913-1919. r9r5-Mercedes, R. De Palma 5 33.55 8984 , Ardmore, Pennsylvania, 1896-1912. 83.26 *1976-Peugeot, Resta 334-17 Baker R & L Company, Cleveland, Ohio, 1899-1924. 1919-Peugeot, Wilcox 88.o6 5 40.42 Bartholomew Company (Glide), Peoria, Illinois, 1901-1920. 192o-, G. Chevrolet 5 38.32 88.5o Borland-Grannis Company, Saginaw, Michigan, 1913-1916. 1921-Frontcnac, Milton 5 34.44 89.62 1922-Murphy Special, J. Murphy 5 17.30 9448 Brewster and Company, Long Island City, New York, 1916-1926. 1923-H.C.S. Special, Milton 5 29.5o 90.95 Briggs Detroiter Company, Detroit, Michigan, 1913-1917. B. r924-, Corum-Boyer 5 05.23 98.24 Briscoe Motor Corporation, Jackson, Michigan, 1914-1921. 1925-Duesenberg, de Paola 4 56.39 101.13 Broc Electric Vehicle Company, Cleveland, Ohio, 1913-1915. *I926--Miller Special, Lockhart 4.13.37 9463 Brush Runabout Company, Detroit, Michigan, 1909-1912. 1927-Duesenberg Special, Souders 5 07.33 9754 Buckeye Manufacturing Company (Lambert), Anderson, Indiana, 1916 distance, 300 miles: 1926 distance, goo miles; all others soo miles. No races 1908-1910. were run in 1917 and 1918 because of the war.

378 THE AUTOMOBILE INDUSTRY APPENDIX C 379 Buick Motor Company, Flint, Michigan, 1904-. Elmore Manufacturing Company. Clyde, Ohio. 1901-1012. Cadillac Motor Car Company (Cadillac, La Salle), Detroit, Michigan, Automobile Company, Indianapolis, Indiana, 1915-1918. 1903, Everitt-Metzger-Flanders Company (E.M.F.), Detroit, Michigan, J. T. Case T. M. Company, Racine, Wisconsin, 1912-. 1908-1910. Cartercar Company, , Michigan, 1906-1915. Ewing Auto Company, Geneva, Ohio, 1909-1910. Chadwick Engineering Works, , Pennsylvania, rim-Iwo. Falcon Motors Corporation (Falcon-Knight). Detroit. Michigan, 1027-. Chalmers Motor Company, Detroit, Michigan, 1907-1024. Flanders Motor Company, Detroit, Michigan, 1912. B. Chandler Motor Car Company, Cleveland, Ohio, 1914-. Flint Motor Company, Flint, Michigan, 1923-. Chevrolet Motor Company, Flint, Michigan, 1914, Ford Motor Company, 1903, Chrysler Corporation, Detroit, Michigan, 1923, H. H. Franklin Manufacturing Company, Syracuse, New York, 1902, Cleveland Automobile Company, Cleveland, Ohio, 1919, Gardner Motor Company, St. Louis, Missouri, two-. , Indianapolis, Indiana, 1912-1925. Garford Company, Elyria, Ohio, 1909-1015. Columbia Motors Company, Detroit, Michigan, 1916-1925. *General Motors Corporation, Detroit, Michigan, 1909-. Commonwealth Motors Company, Chicago, Illinois, 1920-1922. Grant Motor Car Corporation, Cleveland, Ohio, 1915-1923. B. Consolidated Car Company (Abbott-Detroit), Detroit, Michigan, 1909- Gray Motor Corporation, Detroit, Michigan, 1922-1926. B. 1918. Great Western Auto Company. Peru, Indiana, 1013-1915. B. Corbin Motor Vehicle Corporation, New Britain, Connecticut, 1903- H.C.S. Motor Car Company, Indianapolis, Indiana. 1920-. 102. Motor Car Company, Jackson, Michigan, 1916-1910. B. Courier Car Company, Dayton, Ohio, I909-I910. Hal Motor Car Company, Cleveland, Ohio, 1917-1918. B. Crest Manufacturing Company, Cambridge, Massachusetts, 1903-1905. Hanson Motor Company, Inc., Atlanta, Georgia, 1920-1924. B. Crow-Elkhart Motor Corporation, Elkhart, Indiana, 1916-1922. B. Handley-Knight Company, Kalamazoo, Michigan, 1921-1923. B. James Cunningham Son & Company, Rochester, New York, 1911-. Haynes Automobile Co., Kokomo, Indiana, 1895-1923. Daniels Motor Company, Reading, Pennsylvania, 1919-1924. B. Henderson Motor Car Company, Indianapolis, Indiana, 1913-1914. B. George W. Davis Motor Car Company, Richmond, Indiana, 1916-. Herreshoff Motor Company, Detroit, Michigan, 1912-1913. Dayton Motor Car Company (Stoddard-Dayton), Dayton, Ohio, 1905- Holmes Automobile Company. Canton, Ohio, 1920-1923. B. 1912. Hudson Motor Car Company (Hudson, Essex), Detroit, Michigan, Detroit Electric Car Company, Detroit, Michigan, 1906-1923. 1909-. Dodge Brothers, Detroit, Michigan, 1914-. Hupp Motor Car Corporation, Detroit, Michigan, 1909-. Dorris Motor Car Company, St. Louis, Missouri, 1906-1926. Imperial Automobile Company, Jackson, Michigan, 1912-1914. B. , Flint, Michigan, 1915-1924. B. Inter-State Motor Company, Muncie, Indiana, 1908-1919. duPont Motors, Inc., Moore, Pennsylvania, 1920-. Jackson Motors Corporation, Jackson, Michigan, 1904-1923. Durant Motors, Inc., New York City, 1922-. Jones Motor Car Company, Wichita, Kansas, 1919. B. Durant Motor Company of Michigan, Lansing, Michigan, 1921-1926. Jordan Motor Car Company, Cleveland, Ohio, 1917, Durant Motor Company of New Jersey (Star), Elizabeth, New Jer- Kentucky Wagon Manufacturing Company, Louisville, Kentucky sey, 1922-. 1920-1923. Durant Motor Company of Indiana (Princeton), Muncie, Indiana, King Motor Car Company, Detroit, Michigan, 1914-1924. 1924-1925. Kirk Manufacturing Company (Yale), Toledo, Ohio, 1903-1006. B. Motors Manufacturing Company, Jackson, Michigan, 1921-1924. Kissel Motor Car Company, Hartford, Wisconsin, 1903-. Elkhart Motor Company (Elcar), Elkhart, Indiana, 1915-. Kleiber Motor Company, San Francisco, California, 1926-. Electric Vehicle Company (Columbia, Pope-Hartford, etc.), Hartford, Kline Car Corporation, Richmond, Virginia, 1913-1923. B. Connecticut, 1897-1909. Knox Automobile Company, Springfield, Massachusetts, 190o-1914. B.

Elgin Motor Car Corporation, Argo, Illinois, 1917-1923. B. * Owns Cadillac, Buick, Chevrolet, Oakland, and Oldsmobile. 38o THE AUTOMOBILE INDUSTRY APPENDIX C 381

Krit Motor Car Company, Detroit, Michigan, 1913-1914. B. Palmer & Singer Manufacturing Company, New York City, 1909-1910. Lafayette Motors Corporation, Milwaukee, Wisconsin, 1920-1924. B. B. Lewis Spring & Axle Company (), Chelsea, Michigan, 1915- W. A. Paterson Company, Flint, Michigan, 1915-1923. Pathfinder Motor Car Manufacturing Company, Indianapolis, Indiana, 1920. B. 1913-1917. B. Motor Company, Connersville, Indiana, 1915-1926. B. Peerless Motor Car Company, Cleveland, Ohio, 'goo-. Liberty Motor Car Company, Detroit, Michigan, 1917-1923. B. Piedmont Motor Car Company, Lynchburg, Virginia, 1920-1922. B. Lincoln Motor Company, Detroit, Michigan, 1920, Pierce-Arrow Motor Car Company, Buffalo, New York, 1901-. Locomobile Company of America, Bridgeport, Connecticut, 1899-. Pilot Motor Car Company, Richmond, Indiana, 1918-1924. B. Lorraine Motors Corporation, Grand Rapids, Michigan, 1919-1922. B. Pope Manufacturing Company (Pope-Hartford), Hartford, Connecti- Lozier Motor Company, Plattsburg, New York, 1905-1917. B. cut, 1903-1915. Lyons-Atlas Company, Indianapolis, Indiana, 1914-1915. Pope Motor Car Company (Pope-Toledo), Toledo, Ohio, 1903-191o. McFarlan Motor Corporation, Connersville, Indiana, 1913, Premier Motors, Inc., Indianapolis, Indiana, 1904, W. H. McIntyre Company, Auburn, Indiana, 1908-1910. Pullman Motor Car Company, York, Pennsylvania, 1906-I917. B. Maibohm Motors Company, Sandusky, Ohio, 1920-1922. B. Regal Motor Car Company, Detroit, Michigan, 1908-1918. B. Marquette Company, Detroit, Michigan, 1909-1911. B. Reo Motor Company (Reo, Wolverine), Lansing, Michigan, 1904, Matheson Motor Car Company, New York City, 1906-1913. B. Rickenbacker Motor Company, Detroit, Michigan, 1922-1927. B. Maxwell Motor Company, Inc., Detroit, Michigan, 1904-1924. Roamer Motor Car Company, Kalamazoo, Michigan, 1917-. Mercer Motors Company, Trenton, New Jersey, 1909-1926. Rollin Motors Company, Cleveland, Ohio, 1924-1925. Metzger Motor Car Company (Everitt), Detroit, Michigan, 1910- Royal Motor Car Company, Cleveland, Ohio, 1904-1908. 1917. B. S. G. V. Company, Reading, Pennsylvania, 1908-1916. B. Midland Motor Car Company, Moline, Illinois, 1909-191o. B. Sandusky Auto Company, Sandusky, Ohio, 1904. Milburn Wagon Company, Toledo, Ohio, 1915-1916. Saxon Motor Car Company, Detroit, Michigan, 1914-1922. B. Mitchell Motors, Inc., Racine, Wisconsin, 1903-1923. B. The Sayers and Scovill Company, Cincinnati, Ohio, 1919-1924. Moline Automobile Company, East Moline, Illinois, 1904-1918. Scripps-Booth Corporation, Detroit, Michigan, 1915-1922. Monroe Motor Car Company, Pontiac, Michigan, 1916-1921. Searchmont Motor Company, Philadelphia, Pennsylvania, 1903. Moon Motor Car Company (Moon, Diana), St. Louis, Missouri, 1908, Selden Motor Vehicle Company, Rochester, New York, 1906-1914. Mora Motor Car Company, Newark, New Jersey, 1906-1910. B. Sheridan Motor Car Company, Muncie, Indiana, 1920-1921. Mutual Motor Car Company (), Indianapolis, Indiana, 1915- Simplex Automobile Company, New York City, 1907-1910. 1916. B. Simplex Motor Car Company (Amplex), Mishawaka, Indiana, 190E Nash Motors Company, Kenosha, Wisconsin, 1916-. 1910. National Motor Car and Vehicle Corporation, Indianapolis, Indiana, Smith Auto Company, Topeka, Kansas, 1908-1910. B. 1904-1924. Speedwell Motor Car Company, Dayton, Ohio, 1909-1914. Nordyke and Marmon Company (Marmon), Indianapolis, Indiana, Standard Motor Construction Company, Jersey City, New Jersey, 1904, 1903-1905. Northern Manufacturing Company, Detroit, Michigan, 1903-1908. Stayer Carriage Company, Chicago, Illinois, 1913-1914. Oakland Motor Company (Oakland, Pontiac), Pontiac, Michigan, 1908-, F. B. Stearns Company, Cleveland, Ohio, 1898-. Ohio Electric Car Company, Toledo, Ohio, 1910-1918. Stephens Motor Works, Freeport, Illinois, 1917-1924. Ohio Motor Car Company, Cincinnati, Ohio, 1909-191o. B. Stevens-Duryea, Inc., Chicopee Falls, Massachusetts, 1906-1924. B. Olds Motor Works, Lansing, Michigan, 1899, Studebaker Corporation, South Bend, Indiana, 1904, Packard Motor Car Company, Detroit, Michigan, Iwo-. Stutz Motor Company of America, Indianapolis, Indiana, 1913-. Paige-Detroit Motor Car Company, Detroit, Michigan, 1912-. Templar Motor Car Company, Cleveland, Ohio, 1919-1924. B.

raININNIINtir"' APPENDIX C 382 THE AUTOMOBILE INDUSTRY 383 E. R. Thomas Motor Company, Buffalo, New York, 1903-1913. Duplex Truck Company (Duplex), Lansing, Michigan. *United States Motor Company, New York City, 1910-1912. Federal Motor Truck Company (Federal), Detroit, Michigan. Velie Motors Corporation, Moline, Illinois, 1912-. Ford Motor Company (Ford), Detroit, Michigan. Walter Automobile Company, New York, New York City, 1904-1909. Four Wheel Drive Auto Company (F-W-D), Clintonville, Wisconsin. Waltham Manufacturing Company (Orient), Waltham, Massachusetts, Garford Motor Truck Company (Garford), Lima, Ohio. 1903-1910. General Motors Truck Company (G. M. C.), Pontiac, Michigan. Warren Motor Car Company, Detroit, Michigan, i911-1913. B. Gotfredson Truck Corporation (Gotfredson), Detroit, Michigan. Waverley Company, Indianapolis, Indiana, 1913-1917. Graham Brothers (Graham), Detroit, Michigan. Welch Motor Car Company, Pontiac, Michigan, 1901-1909. Harvey Motor Truck Works (Harvey), Harvey, Illinois. Westcott Company, Cleveland, Ohio, 1897-1924. Indiana Truck Corporation (Indiana), Marion, Indiana. , Cleveland, Ohio, 1910-1918. Company (International), Chicago, Illinois. Wills-Sainte Claire Company, Marysville, Michigan, 1921-. Kelly-Springfield Truck and Bus Corporation (Kelly), Springfield, Ohio. Willys-Overland Company (Overland, Willys-Knight, Whippet), Toledo, Kissel Motor Car Company (Kissel), Hartford, Wisconsin. Ohio, 1908-. Kleiber Motor Truck Company (Kleiber), San Francisco, California. Winton Company, Cleveland, Ohio, 1897-1924. Larrabee-Deyo Motor Truck Company (Larrabee-Deyo), Binghamton, Woods Motor Vehicle Company, Chicago, Illinois, 1913-1918. B. New York. Yellow Cab Manufacturing Company (Ambassador), Chicago, Illinois, LeBlond- Motor Truck Company (Schacht), Cincinnati, Ohio. 1921-1923. Locomobile Company of America (Locomohile), Bridgeport, Connecti- cut. Maccar Truck Company (Maccar), Scranton, Pennsylvania. 5. Lists of Truck, Bus, and Taxicab Manufacturers as Mack Brothers Motor Car Company (Mack, Big Brute), New York of January I, 1927 City. Master Motor Truck Manufacturing Company (Master), Middleboro, These lists are not complete, but contain the names of the principal Massachusetts. companies only. Moreland Motor Truck Company (Moreland), Los Angeles, California. MOTOR TRUCKS Nelson and LeMoon (Nelson-LeMoon), Chicago, Illinois. Oneida Manufacturing Company (Oneida), Green Bay, Wisconsin. Acme Motor Truck Company (Acme; United), Cadillac, Michigan. Pierce-Arrow Motor Car Company (Pierce-Arrow), Buffalo, New American Car and Foundry Motors Company (American), New York York. City. Rauch and Lang, Inc. (R and L), Chicopee Falls, Massachusetts. American La France Fire Engine Company (American-La France), Reo Motor Car Company (Reo), Lansing, Michigan. New York City. Republic Motor Truck Company( Republic), Alma, Michigan. Atterbury Motor Car Company (Atterbury), Buffalo, New York. Sanford Motor Truck Company (Sanford), Syracuse, New York. Autocar Company (Autocar), Ardmade, Pennsylvania. Selden Truck Corporation (Selden), Rochester, New York. Brockway Motor Truck Corporation (Brockway), Cortland, New York. Standard Motor Truck Company (Standard), Detroit, Michigan. Chevrolet Motor Company (Chevrolet), Detroit, Michigan. Sterling Motor Truck Company (Sterling), Milwaukee, Wisconsin. Commercial Truck Company (Commercial), Philadelphia, Pennsyl- Stewart Motor Corporation (Stewart), Buffalo, New York. vania. Traffic Motor Truck Corporation (Traffic), East St. Louis, Illinois. Corbitt Motor Truck Company (Corbitt), Henderson, North Carolina. Walker Vehicle Company (Walker), Chicago, Illinois. Denby Motor Truck Corporation (Denby), Los Angeles, California. Walter Motor Truck Company (Walter), New York City. Motor Car Company (Diamond T) Chicago, Illinois. Ward Motor Vehicle Company (Ward). Mt. Vernon. New York. ' Controlled Maxwell, Columbia, Stoddard-Dayton, Brush, and other manufacturers. White Motor Company (White). Cleveland. Ohio. 384 THE AUTOMOBILE INDUSTRY APPENDIX C 385

Willys-Overland Company (Overland), Toledo, Ohio. Larrabee-Deyo Motor Truck Company (Majestic), Binghamton, New Yellow Truck and Coach Manufacturing Company (Yellow), Chicago. York. Moon Motor Car Company (Moon), St. Louis, Missouri. MOTOR BUSSES National Cab and Truck Company (Premier), Indianapolis, Indiana. Acme Motor Truck Company (Acme), Cadillac, Michigan. Oakland Motor Car Company (Oakland), Pontiac, Michigan. American La France Fire Engine Company (American-La France), Peerless Motor Car Corporation (Peerless), Cleveland, Ohio. New York City. Reo Motor Car Company (Reo), Lansing, Michigan. Atterbury Motor Car Company (Atterbury), Buffalo, New York. Roamer Motor Car Company (Pennant), Kalamazoo, Michigan. Corbitt Motor Truck Company (Corbitt), Henderson, North Carolina. Willys-Overland Company (Willys-Knight), Toledo, Ohio. Denby Motor Truck Corporation (Denby), Detroit, Michigan. Yellow Truck and Coach Manufacturing Company (Yellow Cab), Chi- Motors Company (Fageol), Oakland, California. cago, Illinois. Federal Motor Truck Company (Federal), Detroit, Michigan. Garford Motor Truck Company (Garford), Lima, Ohio. 6. Trade and Technical Journals General Motors Truck Company (GMC), Pontiac, Mich. Graham Brothers (Graham), Detroit, Michigan. Horseless Age. New. York, 1895-1918. In 1918, merged with Automo- International Harvester Company (International), Chicago, Illinois. tive Industries. Kissel Motor Car Company (Kissel), Hartford, Wisconsin. Motor World. New York, 1900-1924. Succeeded in 1924 by Motor Larrabee-Deyo Motor Truck Company (Larrabee-Deyo), Binghamton, World Wholesale. New York. Automobile Topics. New York, Igor-. Maccar Truck Company (Maccar), Scranton. Pennsylvania. The Automobile. New York, 1901-1917. In 1017, name changed to Mack Brothers Motor Car Company (Mack), New York City. Automotive Industries and The Automobile. Moreland Motor Truck Company (Moreland), Los Angeles, California. Motor Age. Chicago, 1902, Pierce-Arrow Motor Car Company (Pierce-Arrow), Buffalo, New Automobile Trade Journal. Philadelphia, 1905-. York. Automotive Industries. Philadelphia, 1917-. Formerly called The Reo Motor Car Company (Reo), Lansing, Michigan. Automobile. Republic Motor Truck Company (Republic), Alma, Michigan. Motor. New York, 1905-. Sanford Motor Truck Company (Sanford), Syracuse, New York. Journal of the Society of Automotive Engineers. New York, 1917, G. A. Schacht Motor Truck Company (Schacht), Cincinnati, Ohio. Selden Truck Corporation (Selden), Rochester, New York. 7. List of Automotive Trade Associations, 1927 Standard Motor Truck Company (Standard), Detroit, Michigan. Sterling Motor Truck Company (Sterling), Milwaukee, Wisconsin. NATIONAL AUTOMOBILE CHAMBER OF COMMERCE Stewart Motor Corporation (Stewart), Buffalo, New York. General Offices: Marlin-Rockwell Building, 366 Madison Avenue, at Studebaker Corporation (Studebaker), South Bend, Indiana. 46th Street, New York City. White Motor Company (White), Cleveland, Ohio. Honorary President: Charles Clifton, Chairman of the Board, Pierce- Yellow Truck and Coach Manufacturing Company (Yellow), Chicago, Arrow Motor Company. Illinois. President: Roy D. Chapin, Chairman of the Board, Hudson Motor TAXICABS Car Company. Checker Cab Manufacturing Corporation (Checker), Kalamazoo, General Manager: Alfred Reeves. Michigan. Dodge Brothers, Inc. (Dodge), Detroit, Michigan. MOTOR AND ACCESSORY MANUFACTURERS ASSOCIATION Elcar Motor Company (Elcar), Elkhart, Indiana. General Offices: Fisk Building, 25o West 57th Street, New York City. 386 THE AUTOMOBILE INDUSTRY APPENDIX C 387

Branch Office: Credit Department, First National Bank Building, President: W. C. Stettinius, American Hammered Piston Ring Com- Detroit, Michigan. pany, Baltimore, Maryland. President: H. L. Horning, Waukesha Motor Company, Waukesha, First Vice-President: W. T. Mills, Auto Parts Company, St. Louis, Wisconsin. Missouri. General Manager: M. L. Heminway. Executive Vice-President: E. P. Chalfant, 608-609 Empire Building, Detroit, Michigan. RUBBER ASSOCIATION OF AMERICA Secretary: Robert Macfee. General Offices: 25o West 57 street, New York City. President: J. C. Weston. AUTOMOTIVE EQUIPMENT ASSOCIATION Secretary and General Manager: A. L: Viles. General Offices: 18th Floor, City Hall Square Building, Chicago, Illinois. AMERICAN AUTOMOBILE ASSOCIATION President: E. V. Hennecke, Long Island City, New York. National Headquarters: Pennsylvania Avenue at 17th Street, N. W., Vice-President: A. C. Storz, Omaha, Nebraska. Washington, D. C. Commissioner: Wm. M. Webster, Chicago, Illinois. President: Thomas P. Henry, 41 Burroughs Avenue, Detroit, Michigan. Treasurer: Kane S. Green, 23 South 23rd Street, Philadelphia, Penn- AUTOMOBILE BODY BUILDERS ASSOCIATION sylvania. General Offices: Secretary: Charles C. Janes, Southern Hotel, Columbus, Ohio. 1819 Broadway at 59th Street, New York City. President: General Manager: Ernest N. Smith, Washington, D. C. Hermann A. Brunn, Brunn and Company, Buffalo, New York. NATIONAL AUTOMOBILE DEALERS ASSOCIATION . Secretary-Treasurer: Frederick D. Mitchell. General Offices: 61 East 35th Street, Chicago, Illinois. President: W. L. Hughson, San Francisco, California. NATIONAL ASSOCIATION OF TAXICAB OWNERS Secretary and General Manager: C. A. Vane. Headquarters: 50o North Dearborn Street, Chicago, Illinois. President: W. W. Cloud, Baltimore, Maryland. SOCIETY OF AUTOMOTIVE ENGINEERS Vice-President: Russell Reel, Des Moines, Iowa. General Offices: 29 West 39th Street, New York City. Treasurer: Walter S. Laird, Pittsburgh, Pennsylvania. President: J. H. Hunt, Detroit, Michigan. Secretary: J. G. Williams, Chicago, Illinois. Secretary and General Manager: Coker F. Clarkson. Publications: Transactions (semiannual), Year Book, The Journal TRAILER MANUFACTURER'S ASSOCIATION OF AMERICA including Standard and (monthly), and S. A. E. Handbook, Headquarters: 1133 Broadway, New York City. (revised semiannually). Recommended Practices President: H. C. Fruehauf. NATIONAL ASSOCIATION OF FINANCE COMPANIES First Vice-President: S. A. Griggs. Second Vice-President: H. W. Raymond. First National Bank Building, 33 South Clark Street, General Offices: Secretary-Treasurer: Henry M. Wood. Chicago, Illinois. Manager: Allan P. Ames. President: E. M. Morris, South Bend, Indiana. C. C. Hanch. Secretary and General Manager: MOTOR VEHICLE CONFERENCE COMMITTEE NATIONAL STANDARD PARTS ASSOCIATION Offices: Marlin-Rockwell Building, 366 Madison Avenue at 46th Street, New York City. General Offices: 6o8-6og Empire Building, Detroit, Michigan. 388 THE AUTOMOBILE INDUSTRY

Chairman: D. C. Fenner. Secretary: Russell Huffman. The Motor Vehicle Conference Committee, organized in 1919, is composed of representatives from the following organizations: Ameri- can Automobile Association, Motor and Accessory Manufacturers Association, National Automobile Chamber of Commerce, National Automobile Dealers Association, and the Rubber Association of America.

INDEX INDEX

A Anderson 25 Abel, J. F. 288 Annual income 82 Ability 263, 265 Annals of the American Academy differences in 261 of Political and Social Science 288 Acceleration 57 Appearance 6o-61 Accessories 246 Apperson 26 Accidents 256 Argentina 2 73 Acknowledgements to individuals 329 Articles of Agreement of the Active firms 163 "A.L.A.M." 229,361 Actuarial computation of risks 39 Arvedson, G. C. 377 Additional models 280 Assembled cars 51, 53 Advertising 136, 161 Assemblies, foreign 272 expenditure by entire industry Assembly methods 32 (chart) 147 Association of Licensed Automobile expenditure by various compan- Manufacturers, Mechanical ies (chart) 146 Branch 41, 284, 227, 220, magazine 245 235,302,361 newspaper 145 Associations, list of 385 Aggregate profits 252 Austin, trade-mark 170 Agreement to cross-license pat- Austria 2 73-2 74 ents 236,239 Austrian view 292 Agriculture 11 Automatic machinery 31 Agricultural implements 36 Automobile Board of Trade 235 Air-cooling 89 Automobile manufacturing devel- Airplane 6 opment 53 Air starters 106 Automobile prices IOI Alloy steels 41 Automobile salon 141 American Automobile Associa- Automobile shopping 59 tion 155, 159-16o Automobile show, Chicago 115 A.L.A.M. 227,233,303 Automobile Trade Journal 298 mechanical branch 235 Automotive cooperation, leaders Allison, Robert 95 in 237 American Committee on Highway Automotive journals, list of 385 Transport 288 Automotive stocks 25o American Academy of Political Average length of life of firms and Social Science, Annals of 288 retiring 190 American Motor Car Manufac- Average life of firms 264 turers' Association 229 Average life of firms leaving the American system 36 industry 188 American Telephone and Telegraph Average price of cars, 1903-1916 73 Company 334 Axles 85, 257, 181 391 392 THE AUTOMOBILE INDUSTRY INDEX 393 132, 133, 135 Axle shafts 85 Branch houses Ayres, Leonard P. 295,338 Branch managers 135 Canton, Ohio 40 Chicago Times-Herald 159 Ayres, Milan V. 296 Brands 63 Capacity 276,278 Chicago Trust Company Prize Brayton 26 Capital invested 6, 38, 253, 258-9, 265 Monograph 297 B Brayton type engine 235 figures for 316 China 274 Bachman, B. B. 300 Breakage of parts 86 in entire industry 254 Chisel 263 Bad years 175 Brimmer, Frank B. 289 in Ford Motor Company 240 Chrysler 145, 159, 290 Baker Electric, trade-mark 17o Briscoe, Benjamin 222, 224-226, 302 Capital reinvested 258-259 Chrysler, W. P. 210 Balance 278-279,284 Bronx 16 Capitalists 95, 225,20 128548 Chrysler Corporation 299, 302 182 between means and ends Brooklands race track 35 Carburetors Chrysler plant 45 between sales and manufactur- Brooklyn 16 Carriages 10, 77 Clifton, Charles 237 ing 173 Brown 36 Carry over 203 Church, L. M. 227 in production and marketing Brown-Lipe Gear Co. 51 Carron Iron Works 23 Cities 14, 16 policy 171 Brunel, I. K. 34 Cars scrapped 267-268 growth of 6 Balance sheet Brunel, M. I. 34 Cartercar 166, 182 limits of 15 Ford Motor Company 323 Brush Runabout Company 222 Cash sales 137 Circuit Court of New York 229 General Motors Corporation 325-6 Budgets 84, 119, 269 from factory to dealer 138-139 Circuit Court of Appeals, United Balloon note 322 Buggy 77 to consumer 139 States 233 Balloon tire 107 Buick 4, 8o, 145, 266, 172, 205 Census of Manufactures 179. Clarke 26 Balloon tire production (chart) 109 210, 225, 247, 253, 256 Central America 275 Clarkson, Coker F. 41-42 Bankers 225 sales figures 328 Chain drive 89, 182 Clement 36 Bankruptcies ,8o, 377 Bureau of Labor Statistics 295 Chalmers Motor Company 302 Clerk, Dugald 304 Barker, W. S. 307 Burton, C. M. 291 Chamber of Commerce of the Cleveland 05, 132 Barnes, J. K. 291,304 Bus manufacturers, list of 384 United States 288-289 Cleveland Trust Company 205 Baraboo 158, Busses 12 Changes Closed cars 102, 104, 110-112, 130, 142 Battery 89 Buttons distributed at Chicago in demand 211 illustrations of 113 Beard, Charles and Mary 22 show 115 in design tor, 171, 181, 184, 279, 284 percentage of total production Bentham, Samuel 34 Business cycle 69, 7o after 1912 184 (chart) 112 Benz 26 Business profits, "rent" theory of 261 expense of 181 prices 114 Bicycle 22,36,77,157 Buying motives 55, 61 in design and construction 170, 184 price spread relative to open Big cars 79 Byrn, E. W. 289 in leadership, causes of 208 ones (chart) 114 Billings 36 in manufacturing methods 34 production of 111 Bill of lading, sight draft against 141 C in rate of failures 178 Clough, Albert L. 157,299 Blocks, for ships 34 Channels of market distribution Clutch 85 182 Cadillac 35, 37, 91, 92, 95, 97, Boat, motor 132-135 Coach 6o 238 ,o6, 115, 124, 159, 166, 205, Body shapes Charts, data underlying 334 introduced by Hudson Bodies 52 225, 247, 253, 256 Chapin, Roy D. 209,237,297 254 296 Coffin, Howard E. 41-42, 209, 302 Bohm-Bawerk 292 Company Chassis, designs of, 1903-1907 88 early output of Coleman, Clyde J. rob, 296 Bonanza period 265,276 37 Chassis types, number of 17o plant 45 Columbia Motor Car Company 222 Bonded indebtedness 259 Chauffeur 105,111 328 Columbia and Bond market 84 sales figures Chevrolet 115, 130, 145, 166, 205, Electric Vehicle trade-mark 170 Company 303 Boring machines 262 210, 221, 247, 253, 256, 281, 283-284 Cam shaft 44 Columbia, trade-mark 170 Boulton 23 production, compared with Canada 272 Bradstreet's 295 Ford 281-282 Combinations 166, 218, 223 Canadian Ford Company 308 Brady, Anthony F. 228 sales figures 328 motives which stimulate 223-224 Canadian production 188 Brakes 157 Chicago 15 proposed between Ford, Buick, four-wheel 107 figures for 315 Chicago Automobile Show, souve- Maxwell, Reo 225 nirs distributed at 115 Commercial credit 116

INDEX 394 THE AUTOMOBILE INDUSTRY 395 Cylinder classes Commercial Credit Company 216 termination clause in 250 creation of 136 production by Control effect of productive effective: Commercial Investment Trust 216 1903-1916 by factory over dealers 136, 144 Or ness on 24 Compensation for risk 258,307 1917-1926 (chart) by management over operations 33 223 elasticity of 2 45 Commission of Agricultural In- sales by Conveyor assembly 32 failure to sense shifts in 211 quiry, Joint 9 1903-1916 (chart) 90 increase in 257 Conveyor methods Commodity prices 75 37 1903-1916, Ford excluded probable extent of, 1926-193o 269 Common carriers 9 Convenience goods 59 (chart) 92 replacement 267 Companies, lists of 377 Cooperation, leaders in 237 1917-1926 123 stabilization of 192,266,278 Competition II, 62-65, I0I, Cooperative competition 298 1917-1926, Ford excluded unrealized extent of 263 109, 119, 236 Copeland, M. T. 292 (chart) 125 Demonstrators 149 cut-throat 152, 278 Corbin, trade-mark 170 Cylinder walls 85 Demountable rim 107 free 109, 260, 297 Cord tires 102, 104-205 Czecho-Slovakia 273 Department of Agriculture 8,288-289 market 173 Corn Department of Commerce 309 152 Corn Belt farmers 8 Department stores market distribution D 15 speed 152 Corporate limits of cities 25 Deposits by dealers 137,139-140 Daimler 26 "tempered" 298 Corporation salaries Depreciation 138 Data underlying all charts and Competitive conditions 107 See Barker; Taussig Depression tables 334 concept of a "tempered" set of 152 Cosmopolitan Magazine 305 in 1904, 68 da Vinci, Leonardo 24 Compression engines 2 Cost 292 in IooS, So 35 Day, Edmund E. 82,337 Concentration interaction of, with market in 1914, 7o Day, George H. 2.28 of production 216-218 demand 263 in 1921-1922, 187 Dayton Motor Company 222 171-17 of production 52, 75, 185 Design 156 on few models 2 , 174, 2 79 Dealer 132 Concord 288 of trucking 9 changes in 101, 171, 181, contract 137, 140 Conjunctural gains 261,263-265 reductions in 48 79,28.1 contracts, termination clause in 15o 184, 2 Connecticut 16,222 Cotton 9 after 1912, control of, by factory 136, 144, 148 184 Consignment 136 Coupes 111 expense of changing 181 deposits 137,139 Consolidation of schools 12,288 Courage 261 of parts 85 desire of, for several models 171 Consolidations 167,222,224 Couzens, James 240 Design patents 238 discount 149 Construction, changes in 184 Coxe, Judge 229 Detroit 95, 132, 200,225, endorsement by, of installment 37,40 Consumers' budgets 84 Cranking of cars 105 240,273,290 paper 322 Consumer credit 118 Crankshafts 85 Detroit Saturday Night 302 financing 141 statistics of 322 Credit to consumer 218 Development of industrial franchise 144 Consumer demand 55,63,68 Credit policy 229 technique 263 good will 148 Consumer financing 141 Crisis of 2920 187 Dies 36, 281 Decentralization Consumer good will 148 Cross-licensing of patents 236 of productive operations 46 54 Consumption 83 renewal of 238 Differential abilities 261 of urban population 26 Consumption goods 6o Crowther, Samuel 29o, 298, 302, 305 Differential gains 261 De Dion 26 Cugnot, Nicholas Joseph 25 Differentials, in earnings Contests 57,152 De Dion-Bouton 27 26o-261 effect of, on technical develop- Curb 308 Differential, of Trevithick's Deferred payments 121, 131 265 Curved-dash Oldsmobile 56-57, vehicle 25 ment Deliberate invention 238 152 reliability 139, 300 Delivery of goods 15 Discounts, dealer 149 Continental Motor Corporation Custom hauling 51 9 Demand Display room 142 Contract Cut-throat competition 152,278 basis of 55, 73 Distances from market between dealer and manufac- Cutting metal 263 changes in 77 Distributing practices, question- turer 137 Cycles 69, 70 character of 71 naire on 133 dealer 140 Cyclical factors 6o 396 THE AUTOMOBILE INDUSTRY INDEX 397

Distributing systems, diagram of 134 nature of 257 Engine starters ro6 Factory Distribution through dealers, of automotive stocks 250-252 Enterprise 259 control over dealers 136 characteristics of 136 of entire automobile industry 252 Entrances into automobile manu- costs 47-50 Distributive channels 132-35 of entire industry (chart) 256 facture, 1903-1926 163-164 illustrations of 277 Distributors 132,542-543 on General Motors stock 306 chart of 176 machinery and equipment 43-46 Diversity of type 89 reinvestment of 259 Entrepreneur 37,259,265 methods 31-33,43-47 Division of labor II, 31, 244 Economic theory 252,257,297 Essex 130,167,282,283-283 organization of 31-33,46-47 Dividends 258 Economic welfare 272 Essex Motors, Inc. 167 size of 52,223-217 on General Motors stock 306 Economies European countries, market in 275 system of production 3o Dodge 145,572,253,256,260 external 5o Evans, Oliver 25 versus workshop stage 3o 209, 297 workers, number of Dodge Brothers 144, 209, 240, 308 internal 43, 53, 174 Everitt, B. F. 4, 52 Dodge Brothers, Inc. 247 Education in rural districts 13 Everett-Metzger-Flanders Facts and Figures of the Auto- Dollar, purchasing power of 227 Eight-cylinder cars 90-92,124 Company 95,209 mobile Industry 287 Down payment 119-121 Eight, straight or line type 124 Evolution of industrial situation 263 Failures 165-168 statistics of 322 Eight, V type 224 Excess capacity 278 after 1912 183 Draper, George Otis 298 Einstein, Howard 292 Exhibitions 252 changes in rate of 28o Drilling machines 262 Elasticity of demand 245 Exits of firms charts of 176-177 Dual owners 272 Electrical equipment 106 chart of 176 causes of 170-174 Dual ownership 7o Electric lighting 107 defined 165-168 in general business 279 Duerr, A. C., and Company 303 Electric starting 107 frequency distribution of 189 in 1903-1907 I8o Duncan, A. E. 226 Electric Vehicle Company 228- not always technical failures 18o in 1908-1912 282 Dunham, George W. 300 22 9, 232 ,303 Expansion of outside firms in automobile Dun's Review 179 agreement of, with Winton financing of 250 manufacture 567 Dun, R. G., and Company 269, Company 371 market, 1917-1926 102 percentage of 160 179,295 Electric, Waverly 94 secular rate of, 1903-1916 67 proportion of 174 Durant 205 Elevated 16 Expense rate of 177 Durant Motors, Inc. 301 Elmore, trade-mark 182 maintenance 85 year by year 174 Durant, W. C. 210, Farmers 4, 182, E. M. F. 95,97 of operation 85 225-226,262 Farm Journal 288 Employment of repairs 85 Duryea car 29 Farm-owned vehicles 7 figures for 317 Expensive cars 81 Duryea, Charles E. 4,26,28, Federal Aid Road Act 17 in factories 4 Exports 272 30,160,228,287 Federal Aid roads extent of market for 102 Endorsement of paper by dealers 322 Federal Government 17 of parts, figures for Engine 85,557,282 319 Fellows 36 E of passenger cars, figures for 319 Brayton type 235 File 263 Eames, Albert compression 235 of trucks, figures for 319 35 Finance companies 116, 117, 119, I20 Early construction Diesel Express lines 24, 28 54 9 operating statistics of 322 Early factories, illustrations of 277 eight-cylinder Extension Financial ratios, statistics of 322 Early leaders, causes of their straight-or-line type 124 of market for cars 24, 99, 104, 264 decline 210 V type 124 of market areas for farm and Financial statistics Ford Motor Company 323 Early makes, trade-marks of 270 four-cycle 87 other products 8 Early productive organization 37-40 four-cylinder 79, 107, 122, 181 External economies So General Motors Corpora- Earnings, conjunctural charac- hydrocarbon 235 tion 325-327 of installment sales ter of 263-264 non-compression 235 322 F Financing Earnings oil burning 54 Fabrication of parts 51 aided by dealer deposits as source of capital 224 opposed type 87 139 differentials in 260 Otto type 235 Fabric tires 107 difficulties 225 398 THE AUTOMOBILE INDUSTRY INDEX 399 (continued) "Great Western" Financing (continued) his explanation of his suc- Frequency distribution 34 of firms retiring from manu- Greenfield 288 of enterprises 259 cess 305-306 facture 189 Gridley 36 of early companies 38-40 Ford Motor Company 144, 218, of expansion Functional location of machinery 47 Grosse Point track 160 259 220, 224, 2 2 5, 231, 233, 2 35, 269 Grout, trade-mark 170 of retail sales, principles under- 240, 277, 281, 284, 301 Future demand Grimes, William A. 207 lying 120 balance sheet of 323 Guarantee, by factory 85 of sales 119 decline in production of 281 G Gunn, J. Newton Finished stores 1'51 earnings of 242-246,252 Garage rent 85 7, 287 Guns, assembly of 35 Firestone tires 2 95 Highland Park plant of 240 Gas engine 25 Gurney 25 Firearms 35 integrated condition of 240 Gasoline 85 Firms original investment in 240 price of 275 H movement of, between quar- ownership of 240 Gauges 37,263 tiles, 1903-1916 194 plant capacity of 240 Gears 85 Hall 35 1903-1916 194 percentage of total production Gear shaper 36 Hammer 263 number of, in production dur- of 242 General business failures 179 Hanch, C. C. 120, 236-237, 296 ing 1903-2926, 163-164 price of stock of 240 General level of profits 252 Hancock 25 of 2904, trade-marks of 270 plant of 45, 52 General Motors Corporation (or Handbook of Gasoline Antonio- retiring, length of life of plant, on Piquette Street 283 Company) 166, 182, 205, 210, biles 302,355 (chart) 190 production figures of 324 220, 223, 225, 246, 250, 253, Handbook of the Society of retiring, table of 189 production of, compared with 256, 300, 302, 307 Automotive-Engineers 285 rise and fall of 262, 193 Chevrolet 281-282 assets of, in 1908 and 1927, 219-220 Handicraft methods 3o Fisher 307 Ford-size tires 86, 208 balance sheet of 325-326 Hardy, A. B. C. 300 Fitch, C. H. 290 Foreign assemblies 272 earnings of 247-8,252-2 Harroun, Ray 16o Fitting of parts 35 Foreign countries, market in 273-275 factory sales figures of 328 Hart, Schaffner and Marx prize 291 Fixed capital 39,258 Foreign experiment 27 income account of 327 Harvard Business Review 2 04 Fixed expense in market distribu- Foster and Catchings 27o net worth of (chart) 220 Harvard Index of Trade 203 tion 149 Four-cycle engine 87 organization of 219 Hastings, C. D. 209 Fleetwood Body Corporation 141 Four-cylinder car 74, 80, 90-92 percentage of total production Hauling radius Flexibility in supply 257 Four-cylinder engine 79, 107, 122, 181 of 221 Haynes car 29 Flint 6 Four-cylinder vehicles 82 profits on stock of 306 Haynes, Elwood 4, 26, 30, 287 Floor plan 142 Four-wheel brakes 107, log refinancing of 225 Haynes, trade-mark 170 Florida 20 chart of cars offering 111 Germany 273-274, 294 Hazards of manufacture 170 Fluctuation, Glidden, Charles J. Health 13 France 273-274, 294 154 in percentage of failures 178 Glidden Tour 154 Heavy cars 78-79,211 Franchise dealer 144 Seasonal first annual 155 "Heroic" theory of invention 2 4 149 Francis Times Company 96 Flywheels 44, 46, 85 of 1906, 157 Highland Park plant of Ford Franklin Ford 26, 28-30, 76-77, 90-92, 26, 9o, 113 of 1909, 156, 158 Company 240 trade-mark 101-107, 115, 130, 254, 172, I70 statement of participant in 155 Higher-priced cars 76, 8o, 94, 183,209,215-217,221,223, Free capital 258 Gold mining 264 130, 201, 211 225,230,233,245-246,253, Free competition 109, 260, 297 Goodrich tires 342 production of, 1903-1916 93 256, 26o, 284, 305, 307 Freight shipments by automobile Good roads 17,92,104 production of, 1917-1926 125, 127 Model F 48-49 industry 3o compared with poor roads 21 replacement demand for 127 Model T 49, 283, 305 Frequency distribution Goods, classification of 59 Highways 17, 159,275 six-cylinder 183,301 of factory sales 200-2o2 Good will 148 History of Maxwell Organization 302 Ford, Edsel B. 240 of length of life of compan- Good years 175 Holmes, J. C. 302 Ford, Henry 160, 226, 240, 262, ies 168-169 "Great Eastern" 34 Hower, F. B. 156 287, 290, 298, 302 of length of life (chart) 169 400 THE AUTOMOBILE INDUSTRY INDEX 401

Hoover, Secretary Herbert 20 of product, in manufacture 23 Jackson, R. B. 209 Leading producers, positions rela- Horseless Age 3,30,38,298-299 Installment sales 102, 104, 115, Jackson, trade-mark 170 tive to each other 204, 205 title page of 5 116,117,122,137,271 James 2 5 Leaders of 1903, compared with Horseless carriages 3, 31 by price classes 130-131 Japan 273-27. Ford company 284 Horses, hauling by 7 down payment in 119 Jeffery 165,210,23 3 Leaders, decline of 208 Hough, Judge 227, 229, 233, 304 economics of 118 Jeffery, Thomas B. 23 0 Leaders in automotive coopera- Houses 58,116 recommended terms of 120 Jeffery, Thomas, and Company 16 5 tion 237 322 Jevons 292 Howe 36 statistics of Leadership Time payment Jigs 18 1 95, 199 Hudson 112-113, 115, x67, 172, See also causes of changes in 208 209,224,253,256,277,302 Insurance 85 John, W. A. P. 29 6 LeFevre, Mortier W. 44,292 coach Integration 50,52,240 Joint Commission of Agriculture 114 Leland, Henry M. 35,42, ro6 earnings 247-248,251-252 Interaction of demand and costs 263 Inquiry 9 "Lemon," car known as ISr Hugon Interchange of information 236 Journals, list of 26 385 Length of life Hunt, E. E. 309 Interchangeable parts 34, 35 Journal of file Society of Auto- definition of 164-168 Interchangeable system 263 motive Engineers 291,300 Hupmobile frequency distribution of 169 Interchangeability, lack of 184 Hupp 209 of companies 168 Interest 258 Hyatt Roller Bearing Company 51 K of firms leaving industry 190 Intermediaries, in market distribu- Hydrocarbon engine 235 Kettering, Charles F. 106,296 Lenoir 25 tion 151 Levasser 26 Internal factory organization 47 Kimball, Dexter 290 Level of profits 252 I Internal improvements 17 King, Charles B. 26,29,209,287 License agreement, between Elec- Ignition 105, 184 Internal plant economies 43, 174 King, LeRoy A. 238 tric Vehicle Company and Immediate transportation service 7 versus external economics 53 King, W. I. 270 Imports, figures for 320 Winton Company 371 International Chamber of Com- Knight motor 238 Licensed manufacturers 230-231 Income 81,269 merce 288-289 Knox, trade-mark 170 Lien 121 compared with automobile pro- Interquartile range 194,215 Krebs 26 Life of firms duction 81-85 Interurban 16 See Length of life compared with production Invention 24,28,30,106,238 L Limit gauges 263 (charts) 82, 269 Inventors 27,210 Labor cost in repair 86 Limits of tolerance in manufacture 23 Income account, General Motors Inventories 151,181 Labor, division of Limousines Corporation 327 Invested capital 6,38,253, See Division of labor Lincoln 253 Income scale 8o 258-250,265 Labor hours 49, 50 Lincoln Motor Company 236 Increase in demand 257 figures for 316 Increasing return La Crosse 158 Line eight type 12 4 173 Investment India Lansing 6,37,209,246 Liquidation of firms 166 2 74 all companies 254 Indianapolis speedway I6o Large cars 79,211 Lists of capital 224 Industrial evolution 263 Largest firm, production of 213 of companies in automobile See also Capital invested ; Risks Industrial Revolution 54)262,265 Large-scale enterprise 259 manufacture 163,377 of earnings 224 Industrials 250 Large-scale production 174,245 of passenger car companies 377 in General Motors stock 306 Individual transportation 6 effect of, on cost 185 of persons who aided in this Investors 265 Inflation, postwar 126 La Salle 296 study 329 Information, interchange of 236 Italy 273)294 Lathe 36 of trade associations 385 116 Ingersoll, E. P. 3, 5 Ittleson, Henry Lawrence 36 of trade journals 385 Innovation 210 Lawsuits 238 Litigation over Selden patent 228 J Insolvency 180 See also A.L.A.M.; Electric Vehi- See also Lawsuits Inspection Jackman, William T. 290 cle Company ; Patents ; Selden Little, John L. 116 of dealer, by factory 144 Jackson, Dr. H. N. 158 case ; Selden patent. Localization 132 402 THE AUTOMOBILE INDUSTRY INDEX 403 Location of machinery Market currents 212 Medium-priced cars (continued) Motor boats 182 47 Locomobile, trade-mark 170 Market demand 1917-1926 126 Motorization 19, 275 Locomotives 36,167 changes in 211 Menger 292 Motor trucks. Logarithmic scale 67,266 character of 71 Merger proposed between Ford, See Truck. Losses Market, distance of farmers from 8 Buick, Maxwell, Reo 225 Motor vehicles, production of, 2 54 in time payments 322 Market distribution, channels compared with wagons and Metal cutting 262-263 Long Island 16, 160 of 132-135 carriages so Methods Long run price 191 Market expansion, 1917-1926 102 Motor vehicles scrapped, figures of financing 259 Low-priced cars 76-77,94 Market , extent of 264 of market distribution 132 for 316 production of Market factors 281 Motor World 55,292,294,299 of manufacture 31-33,44-47 1903-1916 Marketing farm products 7 Movement 93 Metropolitan organization 14 1917-1926 126 Marketing policy 245, 276, 280 between production groups, Metzger, William E. 95,209, Low-priced field 211 Market stabilization 97 1903-1916 194 297,303,305 Luxury 106 Marmon 160 between production groups, Michigan 222 Marshall, Alfred 162, 183, 252, 1917-1926 202 Middle Ages 263 M 257,292,299,307-308 of conspicuous leaders, 1903 Maceroni Mileage 18,19 25 Marshallian view 292 1924, 204 Machine centers Miles of road, figures for 321 46 Marxian doctrine 218 of 28 leading producers (chart) 206 Machinery Milk supply 10 35, 43-45, 181 Massachusetts 222 o f 63 firms, 1903-1911) (chart) 1o6 centers for Milling machines 36,16 46-47 legislature of 288 of 63 firms, 5903-1916, sum- Machine location Miner 264 47 Matches 36 marized 202 Machine tools 36, 44, 50, 262-263 Mitchell, A. Z. 209 Maturity 276 of 84 firms, 1917-1926, sum- Mitchell, Wesley C. 2 94,337 Machine tool technique 26o Maudslay, Henry 34, 36 marized 202 Mixed returns 265 Machinists 263 Maxwell 26,52,225,299,302 of 84 firms, 1917-1926 (chart) 203 Mobile steam car Mack Trucks, Inc. 277 Maxwell-Briscoe Company 51, 94 of specific firms 104 Mobility of capital 25S Madison 158 209,222 Multiple drill press 44 Model "D" Buick 8o Madison Square Garden 153 Maxwell Corporation 299 Multiplicity of types 87 Model "F" Ford Magazine advertising 145 Maxwell, John D. 51,155,209 48-49 Munsey's Magazine 3o5 Model "T" Ford Magneto 89 Maxwell Motor Company, Inc. 222 40, 283, 305 Murdock 25 Models Maintenance expense 25,100 Maxwell Organization, History of 302 new 61, 172, 28o Maintenance of price 148-152 Maxwell, trade-mark 170 N number of, profitable to Managerial talent 258 Maybach 26 N. A. C. C. 287,308 make 171-173 Managers of branches 135 McClure's Magazine 305 See also National Automobile Monarch, trade-mark 170 Manhattan 16 McKee, J. M. 288 Chamber of Commerce. Monopolistic character of auto- Man hours 49, 50, 291 Mechaley Brothers, salesroom 138 Nash 210,253,256,260 28 motive products 260 Manufacture, development of Mechanical Branch of the Associa- Nash, C. W. 165 Monopoly 63,65,222-223,232,298 Manufactures, general volume of 8i tion of Licensed Automobile Monthly Labor Review 291 Nash Motors Company 165, 247 Manufacturing, failures in 179-180 Manufacturers 41,184 Montague 288 Nasmyth 36 Manufacturing methods 45, 75 Mechanical designs of 1903-1907 88 changes in Mortality of firms 170, 179, 188 National Association of Finance 34 Median and arithmetic mean pro- Manufacturing plants, illustra- Moody's Manual 304, 307 Companies 119,296,322 duction (chart) 216 tions of 277 Mortgages 121 National Automobile Chamber Median firm, production of 213 of Commerce 227, 235, 267, Manufacturing policy 245 Motives in buying 55 Marginal cost 292 Median life of firms 264 Motives to combine 223-224 275,287,289,204, 297, 299 Market analysis 284 Medium-priced cars 94, 211 Motor Sec also N. A. C. C. National Automobile Dealers Market areas 16 production of See Engine 119.296 Market competition 173 1903-1916 93 Motor 296,299 Association 404 THE AUTOMOBILE INDUSTRY INDEX 405 National Bond and Investment Olds, R. E. Parts makers 39, 40, 50 Planing machines 262 4, 96, 139, 155, 209, Company 226,262,297,302 Passenger cars, number of firms Plant capacity 278 ix 6 National Bureau of Economic Oickwobiie 07, 113, 130,166, making I63-164 Plants, Must rations of 2 77 Research 27o, 294, 337 205, 247, 253, 256, 300 Passenger car companies, list of 377 Platform spring 299 curved-dash model 56,139 National character 72 Passenger car production, figures Pleasure car 57 first buyers in year 1903 96 National income 83 for 314 "Ploughing back" earnings 26o sales figures of 37, 32 8 Net income of various companies 24o Patent agreement 109,239 Plows 167 One-cylinder cars 90-92 Net profits Patent, Selden 227-228,304 Plumber 95 240 Open shop 296 in entire industry 252 See also Selden Patent Pneumatic self-starter to6 Operation, expense of 85 chart of 256 Patents 26,106-107,238 Policies of service 144 Opposed type engines 87 cross-licensing of 236 Policy Net worth Orient Surrey 57 Paved roads 157 manufacturing 182, 245 definition of 353-354 Organization growth of, from earnings Pay roll, figures for 317 marketing 245, 276, 280 224 of early companies 37-39 of General Motors (chart) 220 Peak load 278 sales 147-148 of factories 47 Pearson, Oscar P. 267, 287, Polk, R. L., Company 287 New buyers 267 Organizing ability 39 294, 2 99,342 Pontiac sales figures 328 New England 155, 201, 296 Otto 26 Per capita income 81 Poor's Manual 304-305, 307 New industries, profits in 257 Otto type engine 235 in various countries 94 Pope-Hartford 56 New Jersey 16 2 Outlets, in market distribu- Percentage of failures 169 Pope-Toledo, trade-mark 17o New models 61, 172,28o 132-135 tion after 1912 183 Pope Manufacturing Company 56 New Rochelle 16 Outside investment in automobile chart of 177 Population Newspaper advertising 144 industry 254 fluctuations in /78 of cities 6 Newton 24 Overhauling 85,87 Performing powers 56 proximity of, to highways 20 New York 16, 14o, 158,222 Overland 32,247,260,281 Permanence of the automobile, Port Carbon, Pennsylvania 95 New York Central Railroad 15,289 Sec also Willys-Overland doubt concerning 156 Portsmouth 34 New York City 141, 153, 159 259,265 Owner-manager Periodicals, list of 385 Possession 55, 58, 6> New Zealand 2 73-2 74 Ownership 58 Periods of growth 102 Postal service 11 Non-competing groups of cars 62, 74 Periods in automobile industry's Postponement of purchases 89 Non-compression engines 235 P development 104 Post roads 17 Normal interest 265 Perishable commodities TO Postwar inflation 126 Normal price 191,292 Packard 47, 58, 79, 115, 124, 131, 158-159, 250, Personal possession 55 Power production 33 North 35 253, 256, 260, 307-308 Persons per motor vehicle in Powlison, W. L. 377 North Carolina 12 Packard Motor Car Company 246 various countries (chart) 274 Precision 37 Northern, trade-mark 170 earnings of Persons per passenger automobile 13 instruments of 263 Noyes, Judge 304 246 Packard, J. W. 96 Philadelphia 140 of parts 35 Paige 115 Physicians r 11 Premier, trade-mark 17o O Panhard 26 Pianos 59,116 Present labor 291 Oakland 166,205,247,253,256 Panic of 1907 68 Pierce-Arrow 531, 155, 250, 253, 256 Prestige 55 sales figures 328 Paper, installment, figures upon 322 Pierce, Percy 155 Price 101-102, 127, 292 Ohio 222 Paper profits 271 Pierce, trade-mark 170 average, during 1903-1916 73 Oil 85 Pioneer 209 61-65 Parades 154 determination of Oil burning engines 54 Parlin, Charles C. 297 Pioneer organizations 210 during period 1913-1921 186-187 Old cars, trade-marks of 170 Parts Piquette Street plant 283 increase of, during war 271 Olds 26, 28-30, 225, 228, 287, 300 Pistons 85 maintenance of 148-152 export figures for 319 Olds Motor Works 37-38, 68, fabrication of Planer 36 of automotive and other stocks 25o 51 209,213,225,300 replacement of 144 Planetary transmission 89, 90 of closed cars 114-115 406 THE AUTOMOBILE INDUSTRY INDEX 407 Price (continued) in 1916 4 ,203 Profits (continued) after 2912 183 of cord and fabric tires 107 in 1920 and other years 4 on General Motors stock 306 changes in 178 of gasoline 275 in various countries 320 reinvested of production growth of tires 2 24 86 large-scale 174 rent theory of 261 1917-1926 104 spread of, between closed and of cars compared with goods through purchase of auto- periods in 266 open cars 225 in general 81-85 motive stocks 250-252 of profits 257 Price classes 65, 73-77 of closed cars II I Progressive assembly 32,37 Ratio chart 266 changes in, during 1907-1919 582 of high-priced cars, Progressive performance 46 Ratios, for repossession 122 production by, 1917-1926 124, 128 1917-1926 126-127 Promoters 38 Real estate boom in Florida 20 chart of 129 of licensed manufacturers Publicity 154 Reaming of parts 35 production and factory sales (chart) 230 Purchasing power 48, 12 7, 2 70 Rear axle 181 by, 1903-1916 75 of low, medium, and high-priced Pulley blocks 34 Receivables 116 shift in number of producers cars, 1917-1926 (chart) 126 Reciprocating parts 36 among 185 of low-priced cars, 1917-1926 126 Q Recommended terms, in install- Price control 151 of medium-priced cars, ment selling 120 209 Price cutting 1917-1926 126 Quantity production Records 149 272 Printer of three broad price classes of Quarterly exports (chart) racing 375-376 95 Quarterly Journal of Production cars (chart) 93 transcontinental 158-159 Economics 290, 307 and value of product, figures per factory 213 Recourse, in installment sales 322 Quartiles 294,197,199,299 for periods of growth in 266 Redesigning of models 181 314 policy movement of firms between, as a measure of leadership 1 50, 171 Reduction of costs 37, 44 94-195 1903-1916 194 by cylinder classes rate since 2923 266 Reduction of distances 7 124 production of firms at first by cylinder classes, reports by members to Reeves, Alfred 237, 2 75 and third 213 1917-1926 122-123 N. A. C. C. 236 Refinancing of General Motors 225 Quasi-monopoly 64 by cylinder classes, 1917-1926, resources, shifting of 258 Refinement of designs 107 character of automotive Ford excluded scale of 213 Registration 4, 2 75 124 products 260 by price classes, 1917-1926 total world 320 by sizes of community 7 Questionnaire on distributing (chart) 129 Productive effectiveness 2 74 density by states 13 practices 133 by price classes, Prosperity 85 figures by states 318 Quickness of transportation 7 1917-1926 124,128 Production groups, movement figures by years 317 Quincy 288 in leading countries (chart) 273 capacity 276-277 between 194 Quota, sales of 140, 147 in various countries 321 compared with income 269-271 Profits 39,265,276 2 58 - 2 59 compared with income and average rate of 257 Reinvested capital R Reinvested profits 224 goods in general (chart) 82 conjunctural character of 263-264 Reinvestment of earnings 259 cost 52 difference in 260 Races 57, 152, 254, 159-160 Reliability 56,107 during period 1917-1926 102-105 for entire industry (chart) 256 Racing records 375-376 contests 152 figures by years 314 general level of 252 Radiators 60 growth, rate of tours 154 in 1917 307 Railroad 6, 14, 16, 22, 36 Reo 225, 250, 253, 256, 260,302, 307 1917-1926 104 nature of Rails 250 257 Reo Motor Car Company 224, 246 periods in 266 of Ford, Reo, and Packard Rambler 51,165 in 1895 earnings of 246,250 3 (chart) 243 trade-mark 170 Reo, trade-mark 170 in 1903-1916 65-71 of Nash, Dodge, and Studebaker Range of stock prices (chart) 251 Repair expense 85 in 1903-1916 (chart) 66 (chart) Rate 249 Repair men 87 in 1903-1916, by 3-year periods 72 of various producers 240-252 of failures 177 85-86 in 1903-1926 (chart) 103 of Willys-Overland, General 1903-1907 180 Repairs in 1908 4 Motors, and Hudson (chart) 248 1908-1912 181 Repetitive production 245 INDEX 409 408 THE AUTOMOBILE INDUSTRY Spinning the engine 105 Service policies 144 Replacement demand 98-99, 267-268 Sales; Marketing Shaft drive 89 Sport 55,57 computation of, 1912-1916 295 Sales, by years, price, and cylinder Shaw, A. W. Springfield 284 35 for high-priced cars 127 classes. Sheffield Scientific School 227 Springs 85, 284 methods of calculation of 267-268 See Production Ship blocks life of 86 34 theoretical 98 Shopping for automobiles platform 299 Sales figures, General Motors 59 Replacement parts 144 Corporation 328 Shopping goods 59 semi-elliptic 157 Replacement of parts r8r Square miles of area to miles of Sales policy 247-248 Show, automobile Repossessions 122 first one in 190o, picture of 153 road 275 See also Marketing statistics of 121,322 thirteenth annual one, picture figures for 321 Sales quota 140, 147 Research 239 of 153 Stabilization 98 Salesroom of 2899, illustration of 138 Resources, shifting of 258 Siemens 26 of technique 191 Retail automobile salesroom, San Francisco 158-159 Sight drafts 139 of demand 192,266 Saturation of the high-priced first in Detroit 95 Sight draft against bill of lading 141 of market 97 Retail credit, statistics of 322 car market 81, 93, 94, IOI Single-cylinder cars 90-92, 77, 181 Stages in automobile industry's Retail dealer 132 Sawin, George W. 342 298 development Sinsabaugh, C.G. 104 Scale of production 38,52,213 Retail distribution 132-135 Six-cylinder cars 74, 90, 92, Stages in growth 102 Retail sales, financing of 119 chart of 214 122,124,201 Standardization 34, 86, rot Schools 12 Returns in new industries 257 Side curtains II0 lack of 184 "Scientific distribution" Review of Economic Statistics 293 1 48 Slide-rest 36,262 of parts 41 Revolutionary patents Scientific management 148 Sliding gear transmission 89 reduction of failure because 238 Rent theory of business profits Scrapped cars 267 Small-scale production 86 of 184-185 261 figures for 316 Rhode Island 222 Smeaton, John 23 Standards Committee of the Society Riker, A. L. 26, 160 Scripps-Booth 166 Smiles, Samuel 289 of Automotive Engineers 184 Rim, demountable 107 Seasonal fluctuation 149 Social effects of the automobile 19 Standard methods 26o Second-hand cars Rise and fall of firms 162-163, 284 Social prestige 55, 6o, 62 Standard of living 262 Secular trend 7o Social stratification 62 Standard Oil Company 220 193,195,205 Rising prices 271 Sedans III Society of Automotive Engi- Standard practice in manufac- Selden, George B. 26,227,232,287 Risks 39, 117, 136, 17o, neers 227, 235 turing 174 225,258-261,264,307 Selden Case Record 303 Handbook of 185 Standard terms in installment Durant's attempt to mitigate Selden case Journal of 300 120-121 182 sales Roads 17, 92, 111, 157, 159 testimony in 30 Standards Committee of 26 3 184 Stanley Federal Aid Act 17 final decision in 235 South Africa 2 74 Star 130, 281, 283 mileage of 18,19 Selden patent 26, 227,228, 302, 304 South America 275 Starter paved 157 A.L.A.M. advertisement in Souther, Henry 41, 42 See Self-Starter Road racing 154 support of 234 Sources, list of 329 States, registration figures by 318 Rochester 227 royalties under 231-232 Souvenirs distributed at Chicago Statistics, general automotive 313 Roe, J. W. 262,289-290,308 Self-starter 102,103,105, show 115 Steam cars 96 Royalties 231 106,107,245 Specialization Is, 16, 244, 245 Steam carriages 25 Royal Tourist, trade-mark 170 equipment, cars offering (chart) iio Specialty goods 59 Steam engine 23,25,28 Running gear 157 Selling prices 47 Specification 59, 87, 89, 91, 185 Steam hammer 36 Rural life 13 See also Prices variety in 41 Steam Mobile 94-95 Seltzer, Lawrence H. 258, 291, 22 Ryan, Thomas F. 228 Specific firms, movements of 194 Steamship Rye 16 293,300,301,302, Speed 158 Stearns, trade-mark 170 304, 306, 307, 250-352 Speed competitions 152 Steel maker 185 S Serpollet 26 Speedway races Stevens-Duryea, trade-mark 170 Sales Sewing machines 36, 116, 167 154 See Distributing ; Installment Semi-elliptic springs 157

410 THE AUTOMOBILE INDUSTRY INDEX 411

Steels, alloy 42 Telegraph 22 Trailers 15 Value, market and normal 63 Steel tubing 41 Telford 290 Transcontinental trip, first 158 Value theory 63, 152, 298 Steering 89 Tempered competition 152,298 Transmission 85, 181, 238, 28.1 Valve stems 85 Stock Exchange 308 Templets 181 "Franspo anti° 11 Vandcildoe, I lonicr It 293 Stocks 224 Tensile strength 37 cost 9 Variety, automotive 250 Terminal haulage 15 service 55 in design 87 of General Motors Corporation 306 Termination clause in contracts 150 Trend of production growth, illustration of 88 obstacles to sale of 37-39 Theory 1903-1916 67 in specifications 41 prices of 25o of free competition 297 Trevithick, Richard 25 in style 6o Stockholders 264 of value 63, 152, 298 Trolley car 22 of type 6o net equity of 307 Thomas, trade-mark 170 Truck, motor 135, 146, V type eight 124 Stoddard-Dayton, trade-mark 270 "Thought, skill, and intelligence," 271,276,292 Velie 113 Stone 36 transfer of 31 companies, list of 383 Storrow, James J. 165 Three-cylinder cars export figures for 320 90-92 straight eight 124 Time payment 104, 116-117, hauling by 7 Straight-line rate of growth 204 120,122,130 production figures for 315 Wade, Lieutenant Leigh 159 Stratification, social 62 by price classes 130-113 Trust receipt 242 Wages, Street car figures for 16 down payment in 119 Tubular axles 157 31 7 Studebaker 107,159,172, economics of 118 Turret lathe 36, 44, 46- of management 258 Wagons 10,167,200,249 2 49,253,256 losses in 322 Twelve-cylinder cars 58,90,92 , 124 Studebaker Corporation 247, 2 77 soundness of 121 Twelve months paper 120 Waldon, Sidney 79 Studebaker plant 45 statistics of 322 Twin six 124 Walker, Charles E. 155 Style Walker, Francis A. 26) 6o See also Installment Sales Two-cylinder cars 74, 77, 87, Subsidiary companies 167 Timken-Detroit Axle Company 4o, 51 90-92,181-182 Wall Street Journal 306 Subway althant Manufiu Com - 16 Times, Francis, Company 95 Type., diversify of OD, 80 Summary of market development Times-Herald, Chicago 159 pany 57 Wanamaker, John through 1916 99 Tires 85, 146, 157 140 Supply price U Wants, for automobile as a 264 balloon 107 Surfaced roads United Kingdom consumption good 56 18,19 cord 107 294 Sweden United States Motor Com- War 71,226 274 cord and fabric, price of 107 Symington pany 221-223,225 Warehouse plan 141 25 prices (chart) 86, 108 Systems of distribution, diagram Warner, Thomas Tolley, H. R. 287 United States Rubber Company 287 35 of United States Steel Corporation 22o Warranty 85-86 134 Tooling 46 Tools 36 Universal joints 85 Warren, Ohio 96,246 T See also Machinery ; Machine Tools Upkeep, cost of 85 Washington, D. C. 159 Taps 36 Touring car 6o Urban life 13 Waste 61 Tariff 2 73 Tours, technical contribution Utilities offered by auto- Water-cooling 89 Taxes 273 from mobile 55, 56, 57-58, 6o-61, 72 Watt, James 23, 25,28 Taxicab manufacturers, list 157 See also Glidden Tours Utility 292 Waverly Electric 94 of 384-385 Trade associations, list of Used cars 150 first twenty buyers of 96 385 Taussig, F. W. 307 sold on time 322 Welch 166 Trade-ins 15o, 268 Tayler, F. W. 148 Used car market trade-mark 170 Trade journals, list of 151,268 Technical improvements 239 385 Welfare, economic 271 Technical journals, list of 385 Trade-marks of 1904, illustrations Wheat of V 9 Technique, stabilization in 191 170 White 26 Telephones Trade, taking cars in 150 4, 7, 15 Vacations 20 White, Walter C. 155 number in use 8 Traffic 14 Value of product, figures for 314 Whitney 35 412 THE AUTOMOBILE INDUSTRY

Whitney, W. C. 228 agreement of, with Electric Whitworth 36 Vehicle Company 371 Wholesale distribution 132-135 Wood 262 Wholesalers 142, 143 Woodward, G. C. 289 Widener, P. A. B. 228 Working capital 39, 139 Wieser 292 of dealer 150 Wilkinson 23 Work-in-process Is, Wilson, C. B. 209 Workshop stage 104 Willys, J. N. 297 World markets for motor Willys-Overland 32, 145, 172, vehicles 271-275 209,210,250,253,256 World production, figures for 320 earnings of 247 World registration, figures for 322 Winton 26, 28, 30, 94, 95, World trade, figures for 319 96,97,106,s58,228 World's Work 308 first twenty buyers of 96 Winton, Alexander 96, 160, 287 Y Winton, trade-mark 170 Winton Motor Carriage Yale, trade-mark 170 Company 228,229 Yale University 227